r 


SOME  ASPECTS  OF  THE 
TARIFF  QUESTION 


BY 


FRANK  WILLIAM  TAUSSIG,  Ph.D.,  LlTT.D. 

HENRY  LEE  PROFESSOR  OF  ECONOMICS  IN 
HARVARD  UNIVERSITY 


SECOND  EDITION 


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CAMBRIDGE 
HARVARD  UNIVERSITY  PRESS 

LONDON:   HUMPHREY  MILFORD 
Oxford  University  Press 

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COPYRIGHT,  19 1 5 
HARVARD  UNIVERSITY  PRESS 


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Main  Ubrorps 


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PREFACE 

The  main  purpose  of  the  present  volume  is  to  consider  and  illus- 
trate some  questions  of  principle  in  the  controversy  on  free  trade 
and  protection.  The  three  chapters  which  constitute  Part  I 
state  these  questions  and  summarize  the  main  conclusions. 
The  succeeding  Parts  give  illustrations  and  verifications  drawn 
from  the  history  of  several  industries,  —  sugar,  iron  and  steel, 
and  textiles.  Something  is  thereby  done,  I  trust,  to  make  more 
precise  and  complete  the  theory  of  the  subject,  and  to  vivify  it 
through  illustrations  from  experience;  and  some  contribution  is 
offered  also  on  the  general  economic  history  of  the  United  States. 
The  inquiries  whose  results  are  here  given  have  extended  over 
more  than  a  quarter  of  a  century,  and  I  have  utilized  in  this  book 
portions  of  various  papers  published  at  intervals  during  the 
period.  In  the  Quarterly  Journal  of  Economics  for  April,  1889, 
I  printed  an  article  on  "  Some  Aspects  of  the  Tariff  Question  " 
which  contained  the  germ  of  much  that  is  now  more  fully  elab- 
orated. It  gives  me  satisfaction  to  be  able  to  say  that,  great  as 
have  been  the  changes  during  the  past  twenty-five  years  in 
the  industries  considered  then  and  now,  the  main  reasoning  of 
this  early  article  is  not  impugned.  The  extraordinary  and  in 
many  ways  unexpected  industrial  developments  serve  to  confirm 
its  conclusions  rather  than  modify  them.  Later  articles  in  the 
same  Journal  I  have  used  in  a  more  literal  sense,  by  the  incor- 
poration of  some  passages  verbatim;  two  articles  on  the  iron  and 
steel  industry,  published  in  February  and  August,  1900,  and 
another  on  the  beet-sugar  industry,  published  in  February,  191 2. 
I  have  also  used  parts  of  an  article  in  the  Atlantic  Monthly  for 
March,  1908,  on  sugar  and  reciprocity.  Chapter  II  was  printed 
almost  as  it  stands  in  the  Atlantic  Monthly  for  May,  1913.  The 
substance  of  some  of  the  later  chapters  was  given  in  lectures 
delivered  at  the  Lowell  Institute  in  Boston,  in  191 2. 


IV 


PREFACE 


Valuable  aid  has  come  from  students  who  have  worked  with 
me  on  these  topics  in  Harvard  University.  I  have  to  acknowl- 
edge more  particularly  the  aid  of  Mr.  D.  F.  Dunbar,  on  the  tin 
plate  industry;  of  Mr.  H.  L.  Perrin,  on  some  aspects  of  the 
sugar  trade;  and  of  Mr.  E.  P.  Coleman,  on  copper.  Among  my 
colleagues  in  the  University,  Dr.  M.  T.  Copeland  has  given  in- 
formation and  helpful  suggestions  on  the  fourth  Part,  dealing 
with  textiles;  and  Mr.  A.  H.  Cole  has  kindly  read  all  the  proofs 
and  given  me  the  benefit  of  his  helpful  criticism. 


F.  W.  Taussig. 


Harvard  University 
March,  191 5. 


In  the  second  edition,  some  changes  have  been  made,  particu- 
larly in  the  chapters  dealing  with  the  sugar  industry,  which  bring 
the  descriptive  and  narrative  matter  to  date.  There  has  been  no 
occasion  for  any  considerable  revision  either  of  the  statements 

of  fact  or  the  discussion  of  principles. 

F.  W.  T. 


CONTENTS 

PART  I.    INTRODUCTORY  —  SOME  PRINCIPLES 

CHAPTER  I 

PAGE 

Duties,  Imports,  Prices . 

The  imposition  of  a  duty  does  not  necessarily  raise  the  price  of  the  duti- 
able article,  3.  —  Three  cases:  first,  a  duty  quite  without  effect,  4.  — 
Second,  where  the  continuance  of  imports  shows  the  duty  to  have  full 
effect,  4.  —  Qualifications  as  regards  the  significance  of  continued  im- 
ports: monopoly,  5;  semi-monopoly,  6;  conditions  of  transition,  7. — 
Domestic  goods  also  raised  in  price,  9.  —  Third,  a  duty  prohibitory,  and 
not-serving  to  raise  price  by  its  full  amount,  10.  —  This  case  common 
for  manufactured  goods,  n.  —  The  situation  with  raw  products,  11.  — 
Further  cautions  needed  in  drawing  inferences  from  the  continuation  of 
imports,  12.  —  The  effect  of  a  duty  on  a  commodity  produced  abroad 
under  diminishing  returns,  14. 

CHAPTER  II 
Protection  to  Young  Industries x8 

The  doctrine  as  stated  by  J.  S.  Mill,  18.  —  The  modern  form  of  state- 
ment: prices  are  ultimately  lowered,  19.  —  A  faU  in  domestic  price  in 
itself  proves  nothing,  19.  —  Is  the  doctrine  applicable  to  a  young  coun- 
try only?  20.  —  Industries  quite  new,  22.  — Length  of  time  to  be 
allowed,  23.  —  Opposition  invariably  made  to  eventual  repeal  of  duties, 
23- —  Difficulty  of  interpreting  results  when  duties  are  retained  in- 
definitely, 24.  —  Sporadic  heavy  importation  feared,  26.  —  Is  protec- 
tion likely  to  cause  progress  or  stagnation  ?  28. 

CHAPTER  III 

The  Tariff  and  Wages;    the  Principle   of  Comparative 

Advantage ,0 

The  principle  stated,  30.  —  High  wages  are  the  result  of  high  product, 
31.  — Once  established,  they  appear  to  be  an  obstacle,  32.  — Com- 
modity wages,  32.  —  Money  wages,  33.  —  Money  wages  and  prices,  34. 
—  Prices  of  domestic  goods,  35.  —  Exported  goods,  36.  —  Causes  of 
comparative  effectiveness:  natural  resources,  38.  —  Invention,  ingenuity, 
industrial  leadership,  39.  —  How  the  principle  is  related  to' the  use  of 
machinery  in  the  United  States,  40.  —  Do  high  wages  cause  resort  to 
machinery  ?  41.  —  The  business  leader,  42.  —  Scientific  management, 


~ 


J 


vi  CONTENTS 

43.  —  Utilization  of  low-grade  labor,  44.  —  Imitation  of  American 
machinery,  45.  — Need  of  unceasing  progress  to  maintain  the  com- 
parative advantage,  46.  —  Possibility  of  ultimate  leveling,  47.  —  The 
comparative  advantage  likely  to  persist  long,  49. 


PART  II.    SUGAR 

CHAPTER  IV 
Introductory  —  Louisiana 53 

The  duties  on  raw  sugar,  1870-1913,  53-  — On  refined  sugar,  54.— 
Until  1880,  the  raw  sugar  duty  chiefly  a  revenue  duty,  55.  —  Louisiana 
then  the  only  domestic  producer,  55.  —  Bounty  of  1890;  later  develop- 
ments in  Louisiana,  56. 

CHAPTER  V 

Hawaii 58 

Reciprocity  Treaty  of  1876,  58.  —  Unexpected  growth  of  sugar  imports 
from  Hawaii,  59.  —  The  remission  of  duty  virtually  a  bounty  to  Hawai- 
ian planters,  59.  —  Temporary  cessation,  1891-94,  61.  —  Political  con- 
sequences: revolution,  and  eventually  annexation  to  the  United  States, 
62._  Pressure  on  the  land,  63.  — The  labor  situation:  Chinese,  Por- 
tuguese, Japanese,  65.  —  Conclusion,  68. 

CHAPTER  VI 
Porto  Rico;  The  Philippines;  Cuba 7° 

Sugar  admitted  free  from  Porto  Rico;  again  a  virtual  bounty,  70.  — 
Natural  disadvantages;  irrigation,  71.  — Partial  remission  on  Philip- 
pine sugar,  72.  —  Complete  remission  in  1909,  73.  —  Partial  remission 
on  Cuban  sugar  by  the  reciprocity  treaty  of  1903,  75.  —  Great  extent  of 
Cuban  supply,  76.  —  Effect  of  its  preponderance  at  certain  seasons,  76. 

CHAPTER  VII 
Beet  Sugar •   ■     8o 

Rapid  growth  of  beet-sugar  product  after  1900,  81.  —  Geographical 
concentration  in  the  extreme  west;  favorable  climatic  conditions,  82. 
—  Absence  in  the  central  agricultural  region  explicable  on  the  principle 
of  comparative  advantage,  83.  —  The  sugar  beet  grown  by  intensive 
cultivation,  83.  —  The  labor  supply  for  the  beet  fields,  85.  —  Competi- 
tion with  corn  in  the  corn  belt,  88.  —  Climatic  conditions  not  the  best, 
91.  —  Alleged  agricultural  benefits,  92.  —  Is  the  young  industries  argu- 
ment applicable?  93.  — The  beet-sugar  factories,  95.  —  Conclusion: 
summary  statement  of  the  burden  of  the  raw  sugar  duty,  97. 


CONTENTS  vii 


CHAPTER  VIII 

Refined  Sugar  and  the  Sugar  Trust ioo 

Sugar  refining  protected  throughout,  ioo.  —  The  Dutch  standard,  ioo. 

—  The  differential  on  refined  sugar,  102.  —  The  Sugar  Trust,  103.  — 
Effect  of  the  differential,  104.  —  Competition  between  the  refiners,  106. 

—  The  differential  no  cause  of  exceptional  profits  after  1900,  107.  —  The 
refining  industry  probably  independent  of  protection,  107.  —  Other 
sources  of  gain;  Hawaiian  and  Louisiana  sugar  purchases,  108.  —  Pur- 
chase of  beet-sugar  factories,  112.  —  Conclusion,  113. 


PART  III.    IRON  AND  STEEL 

CHAPTER  LX 
Survey  of  Growth 117 

Extraordinary  growth  of  the  iron  industry,  117.  —  Changes  in  fuel 
used,  and  in  geographical  distribution,  119.  —  Influence  of  Bessemer 
process  and  Bessemer  ores,  121.  —  Lake  Superior  ore,  122.  —  Pennsyl- 
vania coal,  127.  —  Importance  of  transportation,  128.  —  Vertical  and 
horizontal  combination,  130.  —  The  southern  iron  field,  132.  —  Recent 
changes,  133.  —  Summary  figures,  134.  —  Labor  problems;  trade 
unionism,  135.  —  Unskilled  labor,  137. 


CHAPTER  X 

How  far  Growth  was  Due  to  Protection 139 

The  duties  on  iron,  1870-1913,  139.  —  Steel  rail  production  and  prices 
as  an  example,  140.  —  Oscillations  in  the  iron  and  steel  industry,  142.  — 
Burden  of  duty  during  earlier  period,  144.  —  Eventual  lowering  of 
price,  145.  —  Other  causes  than  the  tariff,  147.  —  Difficulty  of  reaching 
unqualified  conclusions,  150.  —  Parallel  case  in  Germany,  151.  —  De- 
ductive versus  inductive  reasoning,  155.  —  Inductive  reasoning  appli- 
cable to  young  industries  controversy,  158. 


CHAPTER  XI 
Copper   . 161 

Duties  on  copper,  1869-1913,  161.  —  Domestic  production,  exports, 
prices,  162.  —  Causes  of  domestic  growth;  the  Michigan  deposits,  the 
Calumet  and  Hecla  mine,  165.  —  The  tariff  had  no  influence,  167. — 
Later  developments,  168. 


Vlll  CONTENTS 


CHAPTER  XII 
Protection  and  Combinations.    Steel  Rails;  Tin  Plate       171 

The  Steel  Corporation  itself  not  a  product  of  the  tariff,  171.  —  Subsidi- 
ary combinations;  steel  rail  pools,  172.  —  Steadiness  of  price  and  price 
policy,  173.  —  Tin  plate;   duties  before  and  after  the  act  of  1890,  176. 

—  Increase  of  domestic  product,  177.  —  Formation  of  the  trust,  178.  — 
The  processes  of  manufacture;  importance  of  the  cheapening  of  sheet 
bars,  179.  —  Gains  of  the  trust  from  the  tariff,  180.  —  Relative  decline 
of  the  trust  after  1900,  181.  —  Lowering  of  prices,  181.  —  Exports,  183. 

—  Gain  in  effectiveness  of  the  American  industry,  185.  —  Comparison 
with  English,  186.  —  The  young  industries  argument  again,  187. — 
Statistics  on  tin  plate,  190. 

CHAPTER  XIII 
Imports  and  Exports  —  Dumping     191 

Iron  products  both  imported  and  exported,  191.  —  Imports,  1870-1910, 
virtually  stationary,  192.  —  Exports  of  two  kinds;  first  group,  the 
highly  manufactured  goods,  193.  —  Explanation  is  in  comparative 
advantage,  194.  —  Further  illustrations;  machine  tools,  197;  sewing 
machines,  198;  anvils,  201;  cutlery,  201.  —  Second  group,  crude  and 
semi-manufactured  products,  201.  —  Dumping;  the  Steel  Corporation's 
activity,  202.  —  Does  a  country  lose  when  dumped  upon  ?  203.  —  Dif- 
ferent phases  of  so-called  "  dumping,"  206.  —  Sporadic  dumping,  206. 

—  Continuous  dumping  a  concomitant  of  monopoly  conditions,  208.  — 
Are  the  Steel  Corporation's  exports  thus  to  be  explained  ?  209.  —  Steel 
rails  again  as  an  example,  211.  —  Other  exports,  212. 


PART  IV.    TEXTILES 

CHAPTER  XIV 
The  Growth  of  the  American  Silk  Manufacture  ....   217 

The  silk  manufacture  a  child  of  protection,  217.  —  The  rates  of  duty, 
1864-1913,  218.  —  Great  growth  of  the  industry;  domestic  production 
and  imports,  219.  —  Raw  silk  free  of  duty  throughout;  occasional 
fruitless  efforts  to  encourage  its  domestic  production,  222.  —  Explana- 
tion of  failure,  in  the  principle  of  comparative  advantage,  224.  —  In- 
fluence of  the  qualities  of  the  raw  material  on  the  manufacture  itself, 
226.  —  Manufacturing  processes:  throwing,  228.  —  American  im- 
provements, 229.  —  Weaving,  230.  —  Labor  problems,  232.  —  Sources 
of  supply  for  raw  silk;  China  displaced  by  Japan,  233. 


CONTENTS  ix 

CHAPTER  XV 

The  Silk  Manufacture,  continued.  European  and 
American  Conditions;  Imports  and  Domestic  Pro- 
duction      235 

Hand  looms  and  power  looms  in  different  countries,  235. —  Germany  and 
Switzerland,  236.  —  France,  237.  —  England;  decline  under  free  trade, 
239.  —  Sewing  silk  in  the  United  States,  242.  —  Ribbons,  244. — 
Velvets,  245.  —  Broad  silks,  246.  —  What  fabrics  continue  to  be  im- 
ported, 247. 

CHAPTER  XVI 

The  Silk  Manufacture  —  Some  Conclusions      249 

Has  protection  to  a  young  industry  been  applied  with  success  ?  249.  — 
The  evidence  difficult  to  interpret,  250.  —  Wherein  it  is  significant 
whether  machinery  is  or  is  not  imported,  251.  —  Throwing  machinery 
of  domestic  make,  252.  —  Weaving  machinery  also,  253.  —  Some 
ancillary  machinery  imported,  254.  —  How  far  has  the  ultimate  end 
been  attained:  are  any  domestic  silks  as  cheap  as  the  foreign  ?  255.  — 
How  protection  veils  the  situation,  255.  —  Some  approach  to  eventual 
success  seems  discernible,  257.  —  Difficulty  of  separating  causes,  258. 

CHAPTER  XVII 

The   Cotton  Manufacture.     Progress   of  the  Domestic 

Industry 261 

The  cotton  manufacture  not  a  young  industry,  261.  —  Rates  of  duty, 
1864-1913,  262.  —  Gradual  stiffening  of  protection,  263.  —  Growth  of 
the  industry,  266.  —  Imports,  267.  —  Duties  on  cheaper  goods  prohibi- 
tory, 268.  —  Technical  development:  ring  spinning  and  mule  spinning, 
270.  —  The  automatic  loom,  273.  —  Skilled  labor  and  unskilled,  275.  — 
Progress  of  the  automatic  loom,  277. 

CHAPTER  XVIII 

The  Cotton  Manufacture,   continued.     Contrasts  with 

Other  Countries;  the  Influence  of  the  Tariff  .    .    .   279 

Cheaper  grades  of  goods  produced  without  dependence  on  protection, 
279-  —  The  Tariff  Board's  conclusions,  281.  —  Export  trade,  282. — 
The  automatic  loom  at  home  and  abroad,  283.  —  Labor  union  opposi- 
tion in  England,  284.  —  Possibilities  from  the  eventual  universalization 
of  improvements,  285.  —  Utilization  of  cheap  labor  in  the  United 
States,  north  and  south,  286.  —  Influence  of  business  leadership,  287. 
—  The  situation  different  with  the  more  expensive  fabrics,  288.  — 
Mule  spinning  machinery  imported,  289.  —  English  superiority  in  fine 


x  CONTENTS 

spinning,  290.  —  How  far  greater  use  of  direct  labor  explains  the  situa- 
tion, 292.  —  Protection  seems  to  have  neither  retarded  progress  nor 
promoted  it,  294. 

CHAPTER  XIX 

Wool •   ■    ■   :   •   2& 

Duties  on  wool,  1867-1913,  296. -Imports  and  domestic  production, 
297  —  Carpet  wool  and  the  principle  of  comparative  advantage,  299. 

—  Clothing  and  combing  wool,  301.  — The  breeds  of  sheep,  302.— 
Imports  tend  to  grow,  304.  -  Estimate  of  burden  of  duty,  306.- 
Changes  in  geographical  distribution  of  domestic  product,  308.  —  Ex- 
planation of  westward  movement,  309.  -  Similar  changes  in  other 
parts  of  the  world,  310.  -  Wool  as  a  by-product  of  general  farming,  312. 

—  The  Tariff  Board's  conclusions,  314.  — Possibilities  of  extension  of 
supply  from  foreign  regions;  Australia,  317.  —  Conclusion,  319. 

CHAPTER  XX 
The  Woolen  Manufacture.     The  Compensating  System; 

Woolens  and  Worsteds 322 

The  system  of  compensating  duties,  322.  -  Originally  not  inaccurate,  it 
soon  became  so,  326. -Various  causes  of  ill  adjustment,  326. -The 
whole  system  out  of  gear  at  an  early  date,  331-  -  The  duties  on  woolens 
in  consequence  much  higher  than  appeared  on  the  surface,  and  on  most 
goods  prohibitory,  332.  -  Growth  of  the  two  main  branches,  woolens 
and  worsteds,  333-  —  Causes  of  the  greater  growth  in  worsteds,  335-  - 
General  changes  in  the  worsted  manufacture;    the  combing  machine, 

338. 

CHAPTER  XXI 
The  Woolen  Manufacture,  Continued.     Characteristics 

of  the  American  Industry 342 

The  problem  as  regards  woolens  and  worsteds,342.  -  Surprising  reliance 
of  the  worsted  branch  on  imported  machinery,  343-  ~  Apparent  lack  ot 
any  advantage,  344- —  Weaving  machinery,  345.  — Other  possible 
causes  of  effectiveness:  large  scale,  integration,  combination,  346^- 
The  woolen  branch  not  young,  349.  -  Much  less  dependence  on  im- 
ported machinery,  35°. -But  the  machinery  older,  possibly  anti- 
quated 351.  -  Some  evidence  of  stagnation,  353-  -  How  far  the  wool 
duty  explains  the  apparent  backwardness  of  the  manufacture,  354- - 
The  worsted  branch  apparently  best  adapted  to  American  conditions, 
3S6  —  Wool  fibre  less  amenable  than  cotton  to  machine  processes,  357- 
-The  labor  supply  for  weaving  woolens,  and  the  principle  of  com- 
parative advantage,  3S9-  ~  Finishing  processes  also  illustrate  the  prin- 
ciple, 361;  and  fine  goods,  363-  —  Conclusion,  364. 


Ul 

f' 


SOME   ASPECTS   OF    THE   TARIFF 

QUESTION 

INTRODUCTORY  — SOME   PRINCIPLES 

CHAPTER  I 

DUTIES,  IMPORTS,  PRICES 

In  this  introductory  chapter  I  shall  consider,  even  at  the  risk  of 
repeating  elementary  matter,  the  way  in  which  duties  work,  the 
significance  of  the  continuation  of  imports  after  duties  have  been 
imposed,  and  the  possibility  of  measuring  the  charge  which  they 
lay  on  the  community. 

A  common  notion  is  that  any  duty  operates  automatically  as 
a  price-raising  cause,  bringing  at  once  and  permanently  a  tax  up 
to  its  full  rate.  Not  a  little  speechifying  of  a  very  effective  kind 
has  consisted  in  an  enumeration  of  extreme  rates,  with  the  im- 
plication that  they  bring  burdens  no  less  extreme.1  Even  more 
remarkable  is  the  eagerness  with  which  protected  producers  have 
themselves  schemed  and  labored  for  high  duties  as  if  it  were 
certain  that  they  would  get  the  full  benefit,  in  a  corresponding 
rise  in  the  price  of  their  wares.  The  burden  which  our  protective 
system  imposed  on  the  community  has  been  much  exaggerated 
by  its  opponents;  but  the  protected  producers  and  their  spokes- 
men have  countenanced  the  exaggeration  by  virtually  endorsing 
the  indictment  against  themselves.  They  ask  for  advances  in 
duties  and  protest  against  reductions  as  if  a  corresponding  effect 
iomestic  prices  were  certain  to  appear. ' 

1  One  of  the  familiar  methods  of  enumeration  is  to  describe  the  taxes  which 
follow  the  consumer  from  the  cradle  to  the  grave;  a  modern  use  of  this  tactical 
device  is  in  the  speech  of  Mr.  Underwood,  when  introducing  the  tariff  bill  of  191 2-13 
in  the  House  of  Representatives,  August  13,  191 2. 


a  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

The  truth  is  that  the  levy  of  a  duty  may  have  no  influence  at 
all  on  domestic  price;  or  it  may  raise  the  price  of  the  dutiable 
commodity  by  its  full  amount;  or  it  may  have  an  effect  inter- 
mediate between  these  extremes.1 

(i)   The  first  case  is  the  simplest.     A  duty  on  a  commodity 
which  is  produced  within  the  country  as  cheaply  as  without,  and 
sold  as  cheaply,  ordinarily  has  no  effect  whatever.      Of  such 
levies  there  has  been  a  plenty  in  our  tariff  history.     Those  on 
the  staple  agricultural  products  are  the  most  familiar  and  con- 
spicuous.    In  the  log-rolling  which  is  an  almost  universal  con- 
comitant of  protective  tariffs,  the  notion  that  a  duty  will  surely 
be  of  benefit  to  domestic  producers  has  caused  our  farming  sec- 
tions to  insist  on  "  their  share  "  of  the  going  favors,  and  to 
accept,  nay  demand,  duties  on  wheat,  corn,  meat  and  meat  prod- 
ucts which  yet  have  been  quite  without  industrial  effect.     There 
has  been  no  more  striking  illustration  of  the  average  farmer's 
naive  state  of  mind  on  this  subject  than  the  bitter  opposition 
aroused  by  the  reciprocity  treaty  with  Canada  which  the  Taft 
administration   proposed  in   1910-11.      The  free  admission  of 
wheat  contemplated  by  that  treaty  was  supposed  to  portend  dis- 
aster to  the  wheat  growers  of  the  northwest;  though  it  was  known 
to  all  the  world  that  wheat  was  exported  both  from  the  United 
States  and  from  Canada,  and  that  it  was  the  same  in  price  (allow- 
ing for  cost  of  transportation)  in  these  two  countries  and  in 
England.      The  range  of  commodities  subjected  to  duties  yet 
not  at  all  affected  by  them,  has  been  very  wide,  including  not 
only  agricultural  staples,  but  many  manufactured  articles. 

(2)  The  second  case  —  that  in  which  the  price  of  the  com- 
modity rises  by  the  full  amount  of  the  duty  —  is  found  when 
imports  continue  after  its  imposition.  Nevertheless  it  is  not  so 
easy  as  may  seem  at  first  sight,  to  determine  just  how  conclusive 
is  the  evidence  from  the  fact  of  importation.  It  will  appear,  as 
we  proceed  in  the  discussion,  that  qualifications  of  various  sorts 
need  to  be  borne  in  mind. 

1  In  this  analysis  I  fou  w  the  method  of  Albert  Gallatin,  in  his  Free  Trade 
Memorial  of  1831;  reprinted  in  the  collection  which  I  have  edited,  State  Papers 
and  Speeches  on  the  Tariff,  pp.    22-123. 


DUTIES,  IMPORTS,  PRICES  5 

Under  the  ordinary  conditions  of  trade,  —  those  of  competitive 
dealings,  —  the  continuation  of  imports  after  a  duty  has  been 
levied  shows  that  the  price  of  the  commodity  is  higher  within  the 
country  than  without  by  the  full  amount  of  the  duty.  This  is 
not  the  same  as  to  say  that  the  price  is  raised  to  the  purchaser 
or  consumer  by  that  full  amount;  a  consequence  which  no  doubi 
commonly  ensues,  but  by  no  means  ensues  under  all  conditions. 
It  is  conceivable  that  the  divergence  between  foreign  and  do- 
mestic price  will  come  about  through  a  fall  in  the  foreign  price, 
not  through  a  rise  in  the  domestic;  or  through  a  partial  fall  in 
the  one,  a  partial  rise  in  the  other.  Of  this  possibility,  more  will 
be  said  presently.  The_onlytlung_which  is  shown  by  the  inflow.. 
-£if  imports  oyer  a,  tariff  barrier  is  that  the  level  of  price  is  higher 
on  one  side  than  on  the  other  by  the  height  of  the  barrier.  The 
reason  is  obvious:  no  trader  will  import  goods,  and  pay  the  duty ! 
on  them,  unless  he  can  sell  them  at  an  advance  over  the  foreign ; 
price  which  will  recoup  him  for  the  duty  paid. 

This  holds,  to  repeat,  under  the  ordinary  conditions  of  trade. 
But  it  does  not  hold  necessarily  in  case  of  goods  produced  in  the 
foreign  country  under  monopoly  conditions.  Under  monopoly, 
there  is  a  possibility  of  difference  in  charge  to  different  purchasers, 
and  hence  a  possibility  that  a  duty  will  not  affect  price  as  it 
would  under  the  conditions  of  a  free  market. 

That  the  incidence  of  a  tax  on  monopoly  products  is  different 
from  that  of  a  tax  on  competitive  products  is  a  commonplace  in 
economics.  Whether  the  tax  be  in  the  form  of  an  excise  or  a 
tariff  duty,  the  monopolist  may  find  it  expedient  to  bear  part  of 
the  charge,  in  an  extreme  case  even  to  bear  the  whole  of  it.  He 
may  be  confronted  by  such  inelasticity  of  demand  as  to  make 
it  most  profitable  to  sell  at  an  advance  in  price  less  than  the  tax, 
perhaps  very  much  less  than  the  tax.  Now,  the  peculiarity  of  a 
customs  duty  is  that  it  makes  divided  markets.  It  is  imposed 
not  on  the  whole  of  the  monopolist's  output,  but  only  on  that 
part  which  is  exported  to  the  country  levying  the  duty.  In  th 
duty-levying  country,  the  monopolist  may  not  raise  his  price  by 
the  full  amount  of  the  duty,  — i.  e.,  may  lower  his  net  price 
what  is  left  to  him  after  the  tax  is  paid  by  himself  or  others. 


-J 


6  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

and  yet  maintain  the  full  previous  charge  in  his  home  market. 
Then  the  divergence  between  the  two  markets  after  the  duty  has 
been  imposed  will  be  less  than  the  amount  of  the  duty.  The 
foreign  producer  then  will  "pay"  some  part  of  the  tax;  not  in  the 
sense  that  he  lowers  his  price  all  around,  but  that  he  lowers  it  on 
the  quota  exported  to  the  duty-levying  country. 

An  analogous  case  is  that  of  "  dumping  "  in  its  typical  form,  — 
that  is,  the  steady  sale  of  a  commodity  £q-a_loreigner  at  a  lower 
price_than  todomestic  consumers.  The  divergence  of  prices  is 
here  also  explicable,  as  a  rule,  on  the  ground  of  monopoly.  Of 
dumping  in  its  various  forms,  more  is  said  elsewhere; l  it  is 
enough  at  this  stage  to  note  that  it  presents  theoretical  problems 
very  similar  to  those  of  the  imports  of  a  monopolized  article  con- 
tinuing after  the  imposition  of  a  duty> 

Complete  monopoly  is  rare  at  best;  and  this  particular  conse- 
quence of  full  monopoly  seems  to  be  even  more  rare.  I  know  of 
no  case,  either  in  American  or  in  foreign  experience,  where  one 
having  a  complete  monopoly  has  in  fact  continued  steadily  to 
send  to  a  foreign  country  a  product  on  which  a  duty  has  been 
levied,  and  then  has  sold  the  product  at  an  advance  in  price  less 
than  the  duty. 

But  imperfect  monopolies, —  those  where  the  product  is  s*ld 
for  a  considerable  time  at  a  price  above  the  strictly  competitive 
rate, —  are  by  no  means  rare.  Competition  works  out  its  effects 
slowly  and  irregularly.  For  long  periods  there  are  quasi-monop- 
olies  due  to  established  reputation,  trademark,  or  brand.  No 
doubt  these  require  for  their  maintenance,  as  well  as  for  their 
first  establishment,  a  considerable  degree  of  business  ability;  but 
they  are  susceptible  of  being  held  in  a  position  of  advantage  for  a 
surprisingly  long  time.  As  in  the  case  of  complete  monopoly, 
though  to  a  less  extent,  the  returns  are  so  high  as  to  make  it  pos- 
sible to  make  some  reduction  in  price  and  yet  retain  enough  to 
make  sales  worth  while.  The  imposition  of  a  duty  may  lead  to 
such  a  concession.  Thus,  a  particular  kind  of  steel  tape  used  by 
engineers,  made  in  England  and  widely  exported,  has  a  long-estab- 
lished name  and  a  quasi-monopoly  position.     "  Specialties  "  of 

1  See  chapter  xiii,  pp.  202-212. 


DUTIES,  IMPORTS,  PRICES  7 

various  kinds  are  brought  from  Europe  to  the  United  States 
under  similar  conditions,  and  indeed  account  for  the  continued 
importation  of  many  classes  of  goods  subject  to  high  duties.  On 
such  articles  the  reduction  in  price  which  may  follow  the  imposi- 
tion of  a  duty  * ,  not  likely  to  be  great;  the  divergence  between 
foreign  and  domestic  price  will  after  all  not  be  far  from  the 
amount  of  the  duty.  But  the  cases  are  frequent  enough,  and 
divergence  sufficiently  noticeable,  to  cause  the  man  of  affairs  who 
encounters  them  to  be  skeptical  about  the  general  proposition 
that  price  rises  by  the  full  extent  of  the  duty  even  when  imports 
continue;  and  they  lead  the  protectionist  to  jeer  once  more  at  the 
"  theoretical  "  free  trader  who  says  that  the  foreign  producer 
bears  no  part  of  the  tariff  burden. 

The  case  is  different  with  commodities  produced  under  strictly 
competitive  conditions.  Here  there  is  a  free  market,  and  a  market 
price  the  same  for  all  purchasers.  Here  it  would  seem  that  there 
is  no  possibility  of  divergence  between  prices  to  different  pur- 
chasers, such  as  appears  in  case  of  monopoly.  It  would  seem, 
therefore,  that  the  continuance  of  imports  proves  at  the  least 
that  price  in  the  duty-laying  country  is  higher  than  in  the  ex- 
porting country  by  the  full  amount  of  the  duty.  Here,  too,  it 
would  seem  clear  that  in  the  long  run  this  full  amount  constitutes 
a  charge  on  the  domestic  consumer,  not  on  the  foreign  producer. 
These  consequences  do  in  fact  appear;  yet  with  temporary  di- 
vergences which  again  puzzle  the  ardent  free  trader  and  are  made 
much  of  by  the  ardent  protectionist. 

A  manufacturer  or  set  of  manufacturers  whose  operations  have 
been  developed  and  adjusted  for  a  large  export  trade  may  be 
"  caught  "  by  the  sudden  levy  of  a  duty.  In  order  to  hold  their 
own  in  a  market  on  which  they  have  relied  for  disposing  of  a 
large  output,  they  may  sell  in  the  duty-laying  country  at  a  less 
price  than  elsewhere.  One  would  suppose  that,  under  competi- 
tive conditions,  the  concession  in  price  would  not  be  confined  to 
the  exported  quota.  Each  of  the  producers,  —  so  the  economist 
would  reason,  —  is  desirous  of  avoiding  the  fall  in  price ;  each 
will  prefer  to  sell  in  the  home  market  at  full  price  rather  than  in 
lign  market  (now  subjected  to  duty)  at  a  reduced  price. 


SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

Competition  between  them  will  cause  the  decline  to  be  distrib- 
uted over  all  the  output.  But  in  fact  things  often  work  out, 
at  least  for  some  time,  differently  from  what  the  close-reasoning 
economist  expects.  The  producers,  it  is  true,  are  desirous  of 
staving  off  the  fall  in  price;  but  this  desire  often  leads  them, 
without  any  express  agreement  or  combination  among  them- 
selves, to  maintain  their  price  on  ordinary  sales,  yet  cut  it  per- 
force on  the  sales  to  the  protecting  country.  They  do  not  wish 
to  "  spoil  "  the  general  market *  or  upset  the  going  price  which 
has  come  to  be  regarded  as  "  fair."  Thus  for  a  time  the  conse- 
quence may  be  similar  to  that  of  monopoly;  there  may  be  a 
reduction  from  the  going  price,  for  the  purchasers  in  the  duty- 
laying  country.  But  all  this  is  for  a  time  only.  Such  special 
sales  at  reduced  prices  are  unwelcome;  they  will  be  dropped  as 
soon  as  possible.  Each  producer  will  prefer  to  sell  all  he  can  in 
the  general  market  where  concessions  in  price  have  been  avoided. 
In  this  general  market,  too,  he  will  be  tempted  to  push  his  sales; 
very  probably  by  concessions  other  than  overt  reduction  of 
price,  —  such  as  longer  credit,  ready  allowance  for  alleged 
damage  or  shortage,  assumption  of  freight  charges.  The  mercan- 
tile world  has  plenty  of  devices  by  which  rates  are  cut  in  fact, 
even  though  nominally  maintained.  The  differences  between  the 
prices  in  sales  to  the  duty-laying  country  and  to  other  markets 
will  gradually  disappear;  and  then,  if  imports  into  the  former  go 
on,  the  normal  inference  from  continued  imports  can  be  drawn: 
price  is  higher  within  such  a  country  than  without  by  the  full 
amount  of  the  duty. 

Further,  that  difference  will  ultimately  appear  as  a  charge  on 
the  domestic  consumers,  not  on  the  foreign  producers.     Only  for 
a  time  will  the  latter  sell  in  the  duty-laying  country  at  a  less  (net) 
J  price  than  they  have  been  previously  getting,  —  assuming  that 

this  previous  price  was  the  strict  competitive  price.  Sooner  or 
later  they  will  withdraw  from  the  business  thus  made  unprofit- 
able or  less  profitable.  If  this  cannot  be  done  without  an  appre- 
ciable reduction  in  total  output,  the  process  will  require  time; 

1  Cf.  the  remarks  on  a  similar  situation  in  Marshall's  Principles  of  Economics, 
Book  V,  chapter  v,  §  6  (6th  ed.). 


DUTIES,  IMPORTS,  PRICE, 

most  of  all,  if  it  cannot  be  done  without  allowing  large  pant  to 
wear  out.1  But  in  the  end  special  sales  to  foreign  countries  and 
general  reductions  in  price  due  to  the  cutting  off  of  the  fort 
markets,  will  cease.  Exports  which  may  be  sent  thereafter  to 
the  duty-laying  country  will  go  under  normal  conditions,  and  the 
normal  consequences  of  duties  will  appear.  Prices  of  the  duti- 
able commodities  will  be  higher  by  the  full  amount  of  the  duty; 
not  only  higher  within  the  protecting  country  than  without,  but 
higher  by  that  full  amount  when  measured  from  the  previous 
level.  In__theJong  run,  the  continuance  of  imports  of  staple 
goods,  after  a  duty  has  been  imposed,  proves  that  the  domestic 
consumer  pays  an  enhanced  price,  or  tax,  to  the  full  extent  of  the 
duty. 

In  the  present  volume,  it  happens,  the  discussion  of  imports, 
duties,  prices  will  have  to  do  chiefly  with  staple  goods  made  under 
competitive  conditions;  moreover,  goods  not  mainly  dependent 
on  the  American  market,  so  that  even  a  temporary  divergence 
from  normal  conditions  will  rarely  need  to  be  considered.2 
regards  the  tariff  schedules  to  be  considered  in  the  following  pages, 
the  general  proposition  holds,  with  little  need  of  allowance  for  the 
qualifications  and  exceptions:  if  imports  continue,  we  may  be 
sure  that  the  domestic  purchaser  pays  a  tax  of  the  full  amount 
of  the  duty. 

If  now  imported  goods,  steadily  sent  in  over  a  tariff  barrier, 
are  raised  in  price  by  the  amount  of  the  duty,  it  follows  that 
any  similar  goods  that  may  be  produced  within  the  country  are 
also  raised  in  price  by  the  same  amount.     Not  only  the  imported 

1  A  case  of  a  different  kind,  yet  analogous  to  those  considered  above  in  that  it 
rests  on  abnormal  conditions,  is  adduced  by  Professor  Brentano.  The  Russian 
state,  being  under  obligation  to  make  heavy  remittances  to  foreign  countries  on 
interest  account,  reduced  its  railway  rates  on  rye  when  Germany  raised  duties  on 
that  grain;  thus  virtually  shouldering  the  duty.  The  stolidity,  lack  of  resource, 
and  general  immobility  of  the  Russian  peasantry  are  also  said  by  Brentano  to  have 
contributed,  for  a  considerable  time,  to  the  same  result.  L.  Brentano,  Die  deut- 
schen  Getreidezolle,  p.  22. 

2  An  exception  to  this  statement  appears  in  the  case  of  tin  plate.  *  Th  s 
foreign  (British)  production  had  been  largely  for  the  American  market,  and 
duty  of  1890  did  serve  for  some  to  depress  the  British  price.     See  below,  chat 
xii,  p.  176. 


IO  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

supply,  but  the  total  supply,  sells  at  a  price  higher  by  so  much 
within  the  country  than  without.  This  is  the  first  article,  and  an 
essential  one,  in  the  free  traders'  indictment  of  protective  duties: 
they  tax  the  consumer  without  bringing  a  corresponding  revenue 
to  the  government.  They  thus  cause  prima  facie  a  net  loss  to  the 
community.  The  higher  price  paid  for  the  imported  portion  is 
not  open  to  this  charge;  what  the  consumer  so  pays  in  taxes  is 
offset  by  the  revenue  yielded  to  the  public  treasury.  It  is  the 
highej;  prjce  of  the  domestic  product  which  has  no  offset.  All 
this  is  a  commonplace  in  economics,  and  there  is  no  occasion  for 
repeating  here  what  has  been  so  often  set  forth. 

(3)  Next  we  have  to  consider  the  third  case,  intermediate 
between  the  two  just  discussed,  — -  that  in  which  a  duty  causes 
a  rise  in  price,  but  one  not  up  to  its  full  amount.  Here  the  duty 
is  prohibitory,  yet  has  its  effects.  It  is  so  high  as  to  cause  the 
cessation  of  imports  which  would  otherwise  come  in.  The  case 
is  one  in  which  there  is  "  need  "  of  protection;  the  commodity 
could  be  got  more  cheaply  from  abroad;  but  the  duty  is  greater 
than  is  needed  to  offset  the  difference  between  domestic  and 
foreign  cost.  There  is  then  no  overt  evidence  on  the  quantita- 
tive effect  of  the  duty.  The  tax  on  the  domestic  consumer  may 
be  nearly  equal  to  the  full  amount  of  the  duty;  it  may  be  con- 
siderably less.  So  far  as  the  evidence  from  imports  goes,  there 
is  nothing  to  prove  there  is  any  tax  at  all,  —  the  case  might  be 
that  mentioned  first  in  our  analysis. 

The  intermediate  case  is  the  most  frequentof  all  as  regardsman- 
ufactured  goods.  It  is  not  often  that  a  duty  is  imposed  on  these 
precisely  so  high  as  to  cause  a  division  of  the  market  between 
foreign  and  domestic  producers.  Such  a  result  was  aimed  at  in 
our  tariff  act  of  19 13,  in  which  the  rates  were  supposed  to  be 
adjusted  on  a  "  competitive  "  basis.1  In  fact,  a  rate  that  is 
really  "  competitive  "  is  difficult  to  fix,  and  was  arrived  at  in  very 
few  of  the  duties  of  19 13.  A  duty  on  a  manufactured  product 
commonly  is  either  so  high  as  to  keep  out  all  imports,  or  so  low  as 
to  admit  all  and  thus  to  be  in  effect  merely  a  revenue  duty.     True, 

1  See  my  Tariff  History  of  the  United  Stales,  p.  418  (edition  of  1914). 


DUTIES,  IMPORTS,  PRICES  1 1 

imports  often  appear  to  continue,  and  a  division  of  the  supply 
between  domestic  and  foreign  quotas  often  appears  to  be  brought 
about.  But  the  appearance  is  deceptive;  the  two  sets  of  goods 
on  examination  prove  to  differ  in  quality,  or  to  be  for  other  rea- 
sons not  in  reality  competitive.  Of  the  need  of  discrimination  in 
interpreting  the  evidence  from  continued  imports  of  manufac- 
tured goods,  more  will  be  said  in  the  ensuing  paragraphs,  and 
still  more  in  the  later  chapters  of  the  volume. 

A  duty  on  the  so-called  raw  materials  is  more  likely  to  be  really 
competitive;  the  probability  is  greater  that  some  part  of  the 
supply  of  such  goods  will  be  brought  in  over  the  barrier  of  a 
duty.  The  reason  for  this  difference  between  manufactured 
goods  and  extractive  products  is  not  far  to  seek.  The  latter  are 
likely  to  be  produced  not  at  uniform  cost,  but  higher  cost  for 
some  parts  of  the  domestic  output  than  for  others</  When  a  duty 
has  brought  about  a  rise  in  domestic  price,  there  will  be  some 
increase  of  domestic  production,  but  not  an  indefinite  increase. 
Diminishing  returns,  i.  e.,  increasing  cost,  will  set  in,  and  will 
bring  a  limit  to  the  extension  of  the  domestic  quota.  Imports 
will  continue,  even  though  on  a  less  scale  than  they  would  without 
a  duty.  Of  this  situation  there  have  been  some  striking  illustra- 
tions in  modern  tariff  history.  One  was  in  the  continuing  im- 
ports of  wool  into  the  United  States  during  the  period  from  the 
close  of  the  civil  war  until  wool  was  admitted  free  in  19 13;  a  case 
which  will  be  followed  in  detail  in  this  volume.1  Another  was  in 
our  imports  of  raw  sugar,  of  which  also  a  full  consideration  will 
follow.  Still  another,  the  occasion  of  a  vehement  political  and 
economic  controversy  in  Germany,  is  in  the  sustained  imports  of 
wheat  into  that  country  after  the  imposition  of  the  wheat  duty  in 
1879  and  its  gradual  increase  in  the  years  thereafter.2  In  all 
these  cases  the  fact  that  imports  came  in  steadily  after  the 
imposition  of  the  duty  proved  beyond  question  that  the  price  of 
the  whole  supply,  domestic  as  well  as  foreign,  was  raised  by  the 
full  amount  of  the  levy. 

1  See  chapter  xix. 

2  On  this  episode  full  figures  are  given  in  Brentano,  Die  deutschen  Gelreide- 
zolle. 


-. --"=-: 


12  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

But,  to  repeat,  in  the  case  of  manufactured  goods,  of  which 
an  increased  supply  can  be  produced  in  the  long  run  without 
rising  cost  per  unit,  the  division  of  the  market  between  foreign 
and  domestic  producers  is  not  so  likely  to  take  place.     It  may  be 
fairly  described  as  a  lucky  hit  when  a  duty  is  adjusted  at  the 
exact  point  which  brings  about  this  result.     In  the  tariff  experi- 
ence of  the  United  States  at  large,  and  particularly  as  regards  the 
schedules  whose  effects  will  be  examined  in  this  volume,  the 
rates  have  usually  been  much  above  the  point  of  prohibition. 
Imports  have  ceased.     To  ascertain  then  what  effect  the  duties 
have  had,  above  all  to  measure  their  quantitative  effects,  proves 
extremely  difficult.     Statistics  of  the  prices  of  the  goods  are  not 
easy  to  get,  and  are  even  less  easy  to  compare  with  due  allowance 
for  differences  in  quality.     In  some  instances,  as  with  ordinary 
grades  of  cotton  cloths,  it  is  tolerably  certain  that  domestic  prices 
have  been  no  higher  than  foreign;  the  case  is  in  reality  our  first. 
With  the  ordinary  grades  of  woolens,  on  the  other  hand,  it  is  clear 
that  domestic  prices  have  been  higher  than  foreign,  yet  by  an 
amount  much  less  than  the  duty;  the  case  is  the  intermediate  one. 
And  for  another  great  class  of  textiles,  silk  fabrics,  the  evidence  is 
conflicting  and  the  outcome  difficult  to  state  with  any  precision; 
there  is  ag:onglomerate  made  up  of  the  two  extreme  cases,  and  of 
various  degrees  of  the  intermediate  case. 

Returning  now  to  a  topic  touched  in  passing  a  moment  ago, 
we  have  to  note  some  further  cautions  and  qualifications  to  be 
observed  when  drawing  inferences  from  the  fact  of  continued  im- 
ports. There  are  not  a  few  cases  where  imports  seem  to  prove 
the  full  rise  in  price,  but  in  fact  do  not  prove  anything  of  the 

kind. 

In  the  first  place,  it  must  be  ascertained  whether  the  goods 
imported  are  in  reality  comparable  to  those  made  within  the 
country.  Textiles  of  all  sorts  have  been  steadily  imported  into 
the  United  States  during  the  period  covered  in  the  present  vol- 
ume, —  cottons,  woolens,  silks.  But  the  imports  have  been  al- 
most exclusively  of  the  finer  and  more  expensive  qualities.  The 
less  expensive  goods,  those  which  are  most  largely  used,  have  been 


DUTIES,  IMPORTS,  PRICES 

made  exclusively  within  the  country.  The  consumers  have  been 
served  by  two  streams  of  heterogeneous  supplies,  not  by  one  of 
homogeneous  supply.  Though  the  custom  house  statistics  register 
considerable  imports  of  silks  and  woolens,  these  have  been  of 
grades  and  qualities  different  from  the  domestic  goods. 

A  striking  case  is  that  of  pig-iron.  Of  this  article  also  the 
customs  returns  show  imports  in  considerable  quantities  for  each 
year  during  the  last  half-century.  But  for  the  greater  part  of 
the  period  they  were  of  special  qualities  only;  classed  as  "  pig- 
iron  "  in  the  tariff  schedules  and  in  the  Treasury  statistics,  yet 
in  fact  without  significance  in  the  general  iron  market.  Almost 
all  of  the  imports  were  of  spiegel-eisen  and  ferro-manganese,  used 
in  comparatively  small  amounts  for  mixing  with  other  iron  in  the 
Bessemer  process.  This  continued  importation  proved  something 
about  the  relation  between  foreign  and  domestic  price  for  that 
particular  grade,  but  nothing  about  the  prices  of  the  enormously 
greater  quantity  of  pig-iron  proper.1 

Again,  exceptional  transportation  conditions  may  cause  an 
imported  commodity  to  find  its  way  into  some  part  of  the  do- 
mestic market  over  a  duty  which  yet  is  prohibitory  as  regards  the 
general  market.  Steel  rails  may  be  carried  from  Great  Britain 
to  Galveston,  by  steamers  which  are  glad  to  get  a  return  freight 
for  cotton,  at  very  low  transportation  charges;  and  it  may  then 
be  to  the  purchaser's  advantage  to  import  them  and  pay  the 
duty  (i.  e.,  a  price  raised  by  the  amount  of  the  duty)  rather  than 
meet  the  comparatively  high  land  freights  from  the  American 
mills,  —  at  Pittsburgh  or  Birmingham  (Ala.).  Yet  steel  rails 
may  be  as  cheap  in  Pittsburgh  as  in  Great  Britain,  and  American 
prices  for  them  in  general  not  higher  than  British.  So  economi- 
cal is  water  transportation  that  steel  rails  have  been  transported 
from  Europe  around  Cape  Horn  to  Puget  Sound,  and  have  paid 
a  considerable  duty,  even  though  rails  were  in  most  parts  of  the 
United  States  no  dearer  than  in  Europe.  Similarly,  pig-iron 
might  come  from  Glasgow  to  New  England  and  other  places  on 
the  Atlantic  coast,  though  charged  with  a  duty  and  though  no 
higher  in  price  at  Pittsburgh  than  at  Glasgow.    Transportation 

3  Cf.  what  is  said  below,  chapter  ■,  pp.  144  seq. 


14  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

conditions  of  this  kind  explain  some  continuing  imports  which 
have  puzzled  those  who  make  inferences  from  the  bare  statistics 
of  foreign  trade. 

Lastly,  we  have  to  consider  another  qualification  and  distinc- 
tion. It  is  one  thing  to  say  that  the  continuance  ofjm  ports 
proves  domestic  price  to  be  higher  than  foreign  price_by  the  full 
amount  of  the  duty;  itisar\<rtth(>r  thing  *p  say  that  the  domestic 
consumer  pays  a  tax  to  that  full  amount.  The  latter  proposition, 
-nisuaTIy~stated  without  qualification  by  the  free  traders,  is  often 
denied  by  protectionists  of  the  extreme  type.  These  are  likely  to 
maintain  that  duties  operate  as  taxes  on  the  foreign  producer,  not 
on  the  domestic  consumer.  To  say  that  duties  always  tax  the 
foreign  producer  is  absurd.  Yet  there  are  conditions,  —  quite 
apart  from  monopoly,  or  temporary  conditions  of  readjustment,  — 
under  which  the  unqualified  free  trade  statement  is  not  completely 
true,  and  the  extreme  protectionist  statement  not  completely 
false ;  conditions  under  which  imports  continue,  price  is  higher  by 
the  full  extent  of  the  duty,  yet  the  domestic  consumer  is  not 
taxed  to  that  full  extent.  And  conversely  the£e_jje_conditions 
under  which  a  remission  of  duty  will  not  low^£^orice^y_jhejfull 
amount. 

These  are  the  conditions,  familiar  in  economic  theory,  where 
production  is  carried  on  underyarying  cost  or  diminishing  re^- 
turns.  The  ordinary  free  trade  reasoning,  like  most  of  the 
reasoning  of  those  British  economists  by  whom  the  theory  of 
international  trade  was  worked  out,  assumed  constant  returns,  — 
on£_imiform_cost  >of  production,,  irrespective  of  the  volume  of^ 
output.  This  at  least  was  assumed  as  regards  the  foreign  supply. 
The  influence  of  varying  cost  or  diminishing  returns  on  domes- 
tic supply,  and  the  consequent  special  effects  of  import  duties  on 
domestic  cost  and  on  the  rent  of  land,  were  conspicuous  in  the 
reasoning  of  those  who  attacked  the  British  corn  laws.  But 
these  same  conditions  may  exist  for  the  imported  supply.  Sup- 
pose that  the  imports  are  of  agricultural  products  or  raw  mate- 
rials, and  that  they  come  from  a  country  whose  natural  resources 
are  not  superabundant.  An  increase  in  the  output  of  a  com- 
modity so  produced  will  cause  its  normal  price  to  go  up,  if  the 


DUTIES,  IMPORTS,  PRICES  1 5 

additional  increments  of  supply  can  be  got  only  at  higher  cost. 
A  decrease  in  output,  conversely,  will  cause  normal  price  to  go 
down,  if  the  sources  of  supply  which  are  abandoned  are  compara- 
tively poor,  and  if  those  which  continue  to  be  utilized  are  com- 
paratively good.  The  margin  of  cultivation  will  rise  in  the 
former  case,  will  fall  in  the  latter;  and  normal  price  will  shape 
itself  correspondingly.  The  particular  case  which  is  to  be  con- 
sidered in  the  present  discussion  is  where  an  import  duty  causes 
part  of  the  foreign  supply  to  be  supplanted  by  domestic  supply, 
and  where  the  abandoned  foreign  quota  had  been  produced  at 
high  cost.  The  recession  of  the  margin  of  cultivation  will  then 
cause  normal  price  to  fall  in  the  foreign  country  •  and  though 
imports  continue,  and  though  domestic  price  be  higher  by  the 
amount  of  the  duty,  it  will  not  be  raised  by  that  full  amount 
above  the  level  whichprgy.ai1pd  heforitthe  duty  was  imposed.  It 
cannot  be  said  that  in  this  case  the  foreigner  bears  any  part  of 
the  tax;  but,  also,  it  cannot  be  said  that  the  domestic  consumer 
pays  a  tax  of  the  full  amount  of  the  duty.  The  converse  case 
arises  where  a  duty  which  had  long  been  imposed  and  had  shut 
out  a  foreign  supply,  is  repealed,  letting  in  the  foreign  article. 
If  the  consequent  pressure  on  foreign  sources  of  supply  causes 
resort  to  poorer  grades  of  land  or  other  natural  agents,  -  -  if  the 
margin  of  cultivation  goes  up,  —  the  normal  foreign  prices  will 
xise^  Then,  in  the  country  where  the  duty  has  been  remittecL 
price  will  go  down  by  less  than  the  amount  of  the  duty.  Some__ 
part  of  the  possible  gain  to  consumers  will  be  offset  bythehigher 
cost  of  the  additional  foreign  supplies. 

This  sort  of  general  reasoning,  however,  is  in  fact  less  likely 
to  be  applicable  to  imported  supply  than  to  domestic  supply. 
The  British  economists  who  made  much  of  it  in  condemning  the 
corn  laws,  but  neglected  to  consider  its  applicability  to  the 
countries  from  which  corn  might  be  imported,  were  substantially 
in  the  right,  even  though  their  theoretic  reasoning  was  not  carried 
far  enough.  It  is  much  more  probable  that  the  conditions  of 
diminishing  returns  will  be  found  for  a  domestic  supply  than  for 
a  foreign  supply.  The  reason  is  obvious.  The  available  area 
in  any  one  country  is  more  likely  to  be  limited,  and,,  therefore, 


■" 


1 6  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

more  likely  to  exhibit  considerable  variations  in  cost.  A  foreign 
supply  is  likely  to  come,  actually  or  potentially,  from  several 
countries.  Within  wide  limits,  it  will  probably  be  produced 
under  conditions  not  of  varying  cost  but  of  constant  cost.  Any 
considerable  increase  in  the  supply  of  wheat  grown  in  Germany 
or  in  England,  for  example,  will  probably  cause  resort  to  inferior 
soils,  or  disadvantageous  pressure  on  all  the  available  soils.  But 
the  same  increase  of  supply  from  foreign  countries,  —  distributed 
over  Canada,  Argentina,  the  United  States,  India,  Russia,  Rou- 
mania,  —  will  cause  no  pressure  at  all.  If  indeed  a  single  country 
or  area  were  the  sole  source  of  supply  for  the  article  subjected  to 
duty,  there  would  be  some  probability  of  increasing  cost  and 
rising  price  after  the  removal  of  the  duty.  But  this  must  be  a 
rare  case ;  at  all  events  I  know  of  none  in  the  tariff  experience  of 
the  United  States.  More  nearly  within  the  bounds  of  possibility  is 
the  case  where,  though  several  countries  contribute  to  the  imports, 
all  of  them  have  pushed  production  to  the  point  where  additional 
output  is  not  certainly  to  be  had  on  the  same  terms.  This  pos- 
sibility exists,  for  example,  in  the  case  of  wool;  and  it  has  been 
alleged  to  exist,  though  with  less  plausibility,  in  that  of  sugar.  As 
will  appear  later,  it  deserves  at  least  to  be  considered  whether  a 
greater  demand  for  foreign  wool,  due  to  the  abolition  of  the  United 
States  duty,  will  cause  some  permanent  rise  in  foreign^  cost  and 
price,  and  so  fail  to  bring  for  the  domestic  consumer  the  full 
expected  gain  from  the  remission.  Even  in  tins  case  the  answer 
seems  to  be  in  the  negative :  the  conditions  of  foreign  supply  are 
sufficiently  flexible  to  prevent  an  outcome  so  disappointing  to  the 
free  traders.1 

So  much  for  the  details,  qualifications,  exceptions,  which  must 
be  borne  in  mind  when  interpreting  statistics  of  imports  or  reason- 
ing about  the  effect  of  duties  on  domestic  price.  Under  the 
ordinary  conditions  of  trade,  if  imports  continue,  the  effect  of  a 
duty  on  prices  is  plain.  The  nature  of  the  effect  is  equally  plain, 
though  its  extent  is  not  so  easy  to  measure  with  exactness,  if  im- 
ports are  stopped  by  the  duty,  yet  would  come  in  were  the  duty 
removed.      Quite  a  different  question  is  whether  these  conse- 

1  See  below,  chapter  xix,  p.  318. 


DUTIES,  IMPORTS,  PRICES  \J 

quences  from  the  imposition  of  a  duty  are  permanent;  whether 
the  price  of  the  dutiable  article,  raised  at  first  by  the  tariff,  may 
not  be  lowered  eventually  in  consequence  of  changes  in  the 
conditions  of  domestic  production.  This  is  the  question  raised 
by  the  doctrine  of  protection  to  young  industries,  to  which  we 
turn  in  the  next  chapter.1 

1  The  reader  will  note  that  I  speak  in  this  chapter  merely  of  the  difference 
between  price  with  the  duty  and  price  without  the  duty,  not  committing  myself 
on  the  question  whether  this  difference  constitutes  or  measures  a  national  loss. 
The  presumption  is  that  a  national  loss  occurs,  and  is  measured  by  the  enhanced 
price  which  the  consumer  pays  on  the  goods  produced  at  home  (not  on  those  im- 
ported, since  here  the  consumer's  burden  is  offset  by  the  government's  revenue). 
Those  conversant  with  the  theory  of  international  trade  need  not  be  told  that 
there  is  the  further  possibility  that  duties  will  disturb  the  equilibrium  of  inter- 
national demand  and  supply,  and  lead  to  a  readjustment  by  which  the  duty-levying 
country  will  gain.  See  the  classic  passage  in  Mill,  Political  Economy,  Book  V,  * 
chapter  iv,  §  6.  Cf.  Marshall's  Memorandum  (of  1908)  on  the  Fiscal  Policy  of 
International  Trade,  §§  7-9;  Taussig,  Principles  of  Economics,  chapter  xxxvii, 
§  1.  The  possibility  has  been  questioned,  but  not  in  my  opinion  on  solid  grounds, 
in  a  note  by  H.  H.  O'Farrell  in  Quarterly  Journal  of  Economics,  August,  1912.  Some 
further  theoretical  aspects  of  the  problem  seem  to  me  to  deserve  attention;  but 
this  is  not  the  place  for  examining  them. 


T — v 


CHAPTER   II 


\.\ 


PROTECTION  TO  YOUNG  INDUSTRIES 

The  argument  for  protection  to  young  industries  cannot  be 
stated  better  than  in  the  terms  used  long  ago  by  a  staunch  ad- 
herent to  the  principle  ot?6^e  trade,  John  Stuart  Mill. 

"  The  only  case  in  which,  on  mere  principles  of  political 
economy,  protecting  duties  can  be  defensible,  is  when  they  are 
imposed  temporarily  (especially  in  a  young  and  rising  nation)  in 
hopes  of  naturalizing  a  foreign  industry,  in  itself  perfectly  suit- 
able to  the  circumstances  of  the  country.  The  superiority  of 
one  country  over  another  in  a  branch  of  production  often  arises 
only  from  having  begun  it  sooner.  There  may  be  no  inherent 
advantage  on  one  part,  or  disadvantage  on  the  other,  but  only  a 
present  superiority  of  acquired  skill  and  experience.  A  country 
which  has  this  skill  and  experience  yet  to  acquire,  may  in  other 
respects  be  better  adapted  to  the  production  than  those  which 
were  earlier  in  the  fielgij  and  besides,  it  is  a  just  remark  of  Mr. 
Rae,  that  nothing  has  a  greater  tendency  to  promote  improve- 
ments in  any  branch  of  production,  than  its  trial  under  a  new 
set  of  conditions.  But  it  cannot  be  expected  that  individuals 
should,  at  their  own  risk,  or  rather  to  their  certain  loss,  intro- 
duce a  new  manufacture,  and  bear  the  burden  of  carrying  it  on, 
until  the  producers  have  been  educated  up  to  the  level  of  those 
with  whom  the  processes  are  traditional.  A  protecting  duty, 
continued  for  a  reasonable  time,  will  sometimes  be  the  least 
inconvenient  mode  in  which  the  nation  can  tax  itself  for  the  sup- 
port of  such  an  experiment.  •But  the  protection  should  be  con- 
fined to  cases  in  which  there  is  good  ground  of  assurance  that  the 
industry  which  it  fosters  will  after  a  time  be  able  to  dispense 
with  it;  nor  should  the  domestic  producers  ever  be  allowed  to 
expect  that  it  will  be  continued  to  them  beyond  the  time  neces- 
sary for  a  fair  trial  of  what  they  are  capable  of  accomplishing."  l 

1  J.  S.  Mill,  Principles  of  Political  Economy,  Book  V,  chapter  x,  §  i. 

18 


2  1  Vff% 

XT        PROTECTION  TO   YOUNG  IN 


%     % 


INDUSTRIES  19 

Simple  as  the  general  course  of  the  argument  is,  something 
more  is  to  be  said  concerning  the  form  in  which  it  has  been  most 
often  urged  in  recent  times  and  the  tests  by  which  to  judge  of 
success  in  attaining  the  desired  result. 

The  form  in  which,  the  argument  most  commonly  appears  in 
connection  with  our  recent  industrial  development  is  the  state- 
ment that  protection  ultimately  lowers  prices.  It  is  admitted 
(grudgingly  perhaps,  —  and  sometimes  questioned  or  even 
denied)  that  the  first  effect  of  the  imposition  of  a  duty  is  to 
raise  the  price  of  the  dutiable  article.  But  domestic  competition 
ensues,  it  is  said,  and  eventually  price_goes  down.  And  when  it 
is  asked  why  the  domestic  producer,  if  he  can  bring  his  commodity 
to  market  after  all  at  the  lowered  price,  really  needs  a  protecting 
duty,  the  answer  is  that  he  'needs  it  at  first,  —  during  the  early , 
stages.  He  needs  to  learn;  he  needs  time  to  develop  the  full 
possibilities.  All  this,  it  is  obvious,  is  simply  the  young  indus- 
tries argument.  But  during  the  last  generation  our  American 
protectionists  have  been  chary  of  using  that  phrase.  The  United 
States  is  no  longer  a  young  country.  Its  industries  are  on  a 
great  scale,  often  on  a  gigantic  scale.,  To  call  them  "  infant  " 
invites  ridicule.  Hence  falling  prices,  alleged  to  be  due  to  domes- 
tic competition,  and  eventual  benefit  to  consumers,  are  the 
pleas  dangled  before  the  public.  Yet  this  is  the  same  reasoning, 
merely  put  in  other  words;  the  question  is  simply  whether  there 
has  been  successful  application  of  protection  to  nascent  industries. 

One  familiar  misapplication  of  the  argument  deserves  atten- 
tion. In  the  hearings  before  congressional  committees  on  tariff 
bills  during  the  last  thirty  years,  there  are  countless  statements, 
often  fortified  by  more  or  less  accurate  statistics,  to  the  effect 
that  the  price  of  one  article  or  another  within  the  country  fell 
after  the  imposition  of  a  duty  on  it.  All  such  evidence  is  beside 
the  point.  The  question  is  not  whether  domestic  price  falls,  but 
whether  it  falls  relatively  to  foreign  price ;  whether  eventually  it 
comes  to  be  as  low  as  the  latter.  If  both  fall  together,  the  domes- 
tic price  always  remaining  higher  than  the  foreign,  nothing  is 
shown  in  support  of  the  young  industries  argument;  or  rather, 
it  is  shown  that  the  facts  adduced  fail  to  support  the  argument. 


1 


< 


20  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

The  circumstance  that  both  sets  of  prices  go  down  indicates  that 
some  other  causes,  —  such  as  improvements  and  inventions  or 
new  resources,  —  have  been  at  work  to  bring  a  reduction  in  price 
the  world  over.  Persistence  of  the  gap  between  the  domestic  and 
foreign  price  indicates  that  no  special  cheapening  influence  has 
been  at  work  in  the  protecting  country.  Only  if  the  domestic 
price  falls  to  the  foreign  level,  does  the  question  present  itself 
whether  protection  to  a  young  industry  has  been  successfully 
applied.  This  is  so-obvious  to  one  trained  inJJi£-e4ements  of 
-"economic  reasoning  that  an  apologyls  almost  needed  for  explain- 
i///  ing  it.  The  repeated  triumphant  parading  of  a  bare  fall  in  prices 
as  evidence  of  success  in  the  working  of  protection  is  perhaps  only 
a  part  of  the  general  shallowness  of  the  stock  presentation  of  the 
protectionist  case.  Yet  this  sort  of  presentation  is  often  made  by 
earnest  and  intelligent  men,  convinced  of  the  goodness  of  their 
case;  one  more  instance,  among  many  that  are  sadly  familiar,  to 
show  that  the  most  elementary  economic  propositions  are  little 
understood,  and  the  simplest  economic  reasoning  needs  to  be 
stated  and  illustrated  again  and  again. 

A  different  question,  and  one  not  so  simple,  is  whether  there 
is  any  prospect  of  gain  from  protecting  young  industries  in  a 
country  as  fully  developed  as  the  United  States  has  been  smce 
i860;  whether,  for  so  robust  and  full  grown  a  social  body  as  this 
has  become,  ridicule  is  not  a  sufficient  answer,  whatever  the  terms 
in  which  the  argument  is  stated.  In  that  earlier  formulation  of 
the  argument  which  won  a  respectful  hearing  from  the  fair-minded, 
stress  was  laid  on  the  general  conditions  of  the  country  imposing 
protective  duties.  It  was  a  young  country  that  was  spoken  of 
by  Mill,  rather  than  one  having  young  industries.  List's  well- 
known  plea  rested  on  his  doctrine  of  stages  in  economic  evolution, 
—  on  the  inevitableness  of  the  transition  from  the  agricultural 
and  extractive  stage  to  the  manufacturing  stage,  and  on  the 
advantages  of  protective  duties  for  furthering  and  easing  this 
transition.  He  found  the  United  States  in  this  stage  of  develop- 
ment when  he  was  sojourning  here  during  the  period  of  our  early 
protective  movement.  On  his  return  to  Germany,  he  found  his 
own  country  in  a  similar  stage,  and  agitated  for  nurturing  pro- 


PROTECTION   TO   YOUNG  INDUSTRIES 


21 


tection  there  also.  The  possibility  of  good  results  from  protective 
duties  under  such  conditions  is  now  denied  by  few.  But  does 
the  same  possibility  exist  when  this  particular  period  of  transi- 
tion is  past,  when  the  manufacturing  stage  has  been  fairly 
entered,  when  the  question  no  longer  is  whether  manufacturing 
industries  shall  be  established  at  all,  but  whether  some  particular 
kinds  of  manufactures  shall  be  added  to  others  already  flourish- 
ing ? 

Notwithstanding  early  prepossessions  to  the  contrary,  I  am 
disposed  to  admit  that  there  is  scope  for  protection  to  young 
industries  even  in  such  a  later  stage  of  development.     Any  period 
of  transition  and  of  great  industrial  change  may  present  the 
opportunity.      No  doubt  j  the  obstacles  to  new  ventures  were 
greater  during  the  first  half  of  the  nineteenth  century  than  they  *  /* 
have  come  to  be  in  the  modern  period.      The  general  diffusion  f 
of  technical  knowledge  and  technical  training,  the  lessening  of 
secrecy  in  trade  processes  which  is  the  inevitable  result  of  large- 
scale  operations,  the  cessation  of  regulations  like  the  early  British 
prohibition  of  the  export  of  machinery,  the  greater  plenty  of 
expert  mechanics  and  machinists,  —  all  these  factors  tend  to 
facilitate  the  establishment  of  industries  whose  difficulties  are 
no  more  than  temporary  and  transitional.      None  the  less  the 
early  stage  of  any  new  industry  remains  difficult.      In  every 
direction  economists  have  come  to  reebgnize  the  immense  force 
of  custom  and  routine,  even  in  the  countries  where  mobility  and 
enterprise  are  at  the  highest.      Departure  from  the  habitual 
paths  of  industry  brings  unexpected  problems  and  difficulties, 
false  starts  and  initial  losses,  often  a  fruitless  imitation  of  familiar 
processes  before  new  and  better  ones  ar^devised.      All  this  is 
made  more  trying  when  a  young  competitor  is  striving  to  enter  the 
market  against  a  producer  who  is  established  and  well  equipped. 
The  obstacles  in  the  way  of  promising  industries,  though  doubt-* 
less  not  so  great  as  they  were  a  century  ago,  remain  great.     The 
experiences  of  the  United  States  during  the  last  fifty  years,  some 
of  which  will  bu.described  in  the  following  pages,  indicate  that 
there  remains  in  modern  times  at  least  the  possibility  of  acquir- 
ing a  self-sustaining  industry  by  aid  during  the'early^sfages. 


22  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

The  most  striking  cases  in  which  success  of  this  sort  may  be 
fairly  alleged  to  have  been  secured  are  those  of  industries  quite 
new,  —  not  existing  at  all  at  the  time  when  the  protective  duty 
was  imposed.  Where  an  industry  is  already  started,  or  where 
there  exist  others  closely  related,  further  extension  may  be 
expected  to  take  place,  if  the  conditions  are  really  favorable, 
without  any  legislative  stimulus.  If  a  silk  manufacture  already 
is  established,  the  development  of  new  branches  of  silk  making  is 
not  likely  to  meet  with  the  special  obstacles  to  young  industries. 
And  if,  none  the  less,  protection  has  been  applied,  and  if  there- 
after a  self-sustaining  additional  branch  of  the  manufacture  has 
grown  up,  the  question  at  once  presents  itself,  would  not  the  same 
growth  have  ensued  in  any  case  ?  and  was  the  protection  needed  ? 
Such  skepticism,  however,  would  be  hardly  justified  if  there  had 
been  no  silk  manufacture  of  any  sort  before  the  protection  was 
applied.  Precisely  this  outcome,  —  the  establishment  of  an  in- 
dustry entirely  new,  —  has  appeared  under  our  duties  on  silks 
during  the  last  half-century.  Without  the  duties,  it  is  doubtful 
whether  there  would  have  been  any  silk  manufacture  at  all.  And 
if  in  course  of  time  that  manufacture  proved  capable  of  supply- 
ing the  country  with  its  products  more  cheaply  than  those  im- 
ported, or  at  least  as  cheaply,  the  presumption  would  be  strong 
that  a  young  industry  has  been  successfully  nurtured.  It 
remains  to  be  examined,  in  the  following  pages,  whether  this 
latter  condition  has  been  met;  but  the  other  condition,  —  that 
an  industry  completely  new  was  brought  into  being,  —  certainly 
is  found  in  the  case  of  the  silk  manufacture.  In  the  case  of 
worsteds  also,  there  was  virtually  no  industry  at  all  before  the 
civil  war;  it  has  grown  up  under  the  barrier  of  protection.  The 
same  thing  has  happened  with  plate  glass,  and  with  many  another 
commodity.  In  such  cases,  —  if  eventual  independence  has 
been  achieved,  —  it  may  be  fairly  said  that  protection  was 
applied  to  an  industry  really  young. 

Further:  the  length  of  time  to  be  allowed  for  the  experiment 
should  not  be  too  brief.  Ten  years  are  not  enough ;  twenty  years 
may  be  reasonably  extended;  thirty  years  are  not  necessarily 
unreasonable.      When  writing  of  the  earlier  stages  of  United 


PROTECTION   TO   YOUNG  INDUSTRIES  *  5 

States  tariff  history,  I  intimated  that  the  first  sharp  break,  in 
1810-20,  from  the  established  ways  of  industry,  and  the  very 
first  ventures  in  new  paths,  were  sufficient  to  give  the  needed 
impetus,  and  that  thereafter  protection  might  have  been  with- 
drawn.1 An  opinion  of  this  sort  I  should  not  now  support.  What 
has  already  been  said  of  the  tenacity  of  old  habits  and  the  diffi- 
culties of  new  enterprises  justifies  the  contention  that  a  genera- 
tion, more  or  less,  may  elapse  before  it  is  clear  whether  success 
has  been  really  attained. 

Nevertheless,  in  the  end  the  final  test  must  be  applied,  —  can 
Jhe  industry,  after  a  period  not  unreasonably  long,  maintain  itself 
unaided  ?  The  gist  of  the  young  industries  argument  is  that  the 
community  bears  an  initial  charge  for  the  sake  of  an  eventual 
gamT  That  gain  is  secured  only  if  the  community  is  finally  sup- 
plied with  its  goods  as  cheaply  as  the  displaced  foreigner  could 
supply  it.  The  young  industry  must  mature  so  fully  as  to  sus- 
tain itself.  The  final  test  would  seem  to  be  indifference  to  the 
continuance  of  the  duty  and  willingness  to  meet  foreign  competi- 
tion on  even  terms.  If  the  industry  continues  to  need  protection 
indefinitely,  and  never  succeeds  in  offering  its  products  as  cheaply 
as  they  could  be  got  by  importation,  then  its  protection  cannot 
be  defended  on  this  plea.  There  may  be  good  pIeas~on  political 
or  social  or  military  grounds;  or  the  stock  arguments  about  home 
labor  and  home  markets  and  the  "  acquisition  "  of  valuable 
industries  may  be  repeated;  but  there  can  be  no  pretense  that  a 
young  industry  has  been  nurtured  with  success. 

It  happens,  however,  that  there  is  always  the  most  violent 
opposition  to  the  application  of  this,  the  sole  decisive  test.  In 
the  same  breath  we  are  told  that  prices  have  been  brought  down 
and  a  flourishing  industry  has  been  brought  to  maturity,  —  and 
also  that  the  duties  must  by  no  means  be  touched.  It  might 
seem  reasonable  to  infer  from  this  invariable  unwillingness  to  sub- 
mit to  the  real  test  that  real  success  was  never  attained,  —  that 
the  talk  about  domestic  progress  and  lowered  prices  was  empty 
froth.  And  yet,  with  all  the  obvious  inconsistency  on  the  part  of 
the  protectionists,  it  can  be  fairly  argued  that  their  case  is  not 

1  See  my  Tariff  History,  pp.  34,  45. 


24  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

necessarily  vitiated.  The  persistent  clinging  to  the  accustomed 
props,  even  though  these  were  never  designed  to  be  permanent,  is 
often  due  to  mere  ignorance  or  nervousness.  Most  business  men 
know  singularly  little  beyond  the  range  of  their  daily  routine. 
When  customs  duties  have  kept  foreign  competitors  out  of  the 
market  for  twenty  or  thirty  years;  when  a  trade  has  habituated 
itself  to  domestic  supply  only;  when  there  is  a  great  din  about 
pauper  labor,  designing  foreigners,  ruinous  flooding  of  the  market 
and  what  not,  —  there  will  be  opposition  to  the  removal  of  duties, 
even  though  in  fact  the  removal  would  make  no  difference.  All 
business  men,  and  all  workmen  likewise,  are  uneasy  about  in- 
truders. They  prefer  to  be  on  the  safe  side,  and  to  avoid  the 
slightest  chance  of  having  to  face  competition  from  new  quarters. 
It  will  often  happen,  too,  that  some  special  phase  of  an  industry 
will  in  fact  be  damaged  by  foreign  competition,  even  though  the 
industries  as  a  whole  be  independent  of  it.  Then  there  will  be  as 
much  overt  opposition  to  a  reduction  or  removal  of  duties  as  if  the 
whole  were  at  stake.1 

Under  these  circumstances  it  will  not  be  easy  for  the  searcher 
after  truth  to  interpret  the  situation  rightly  and  to  reach  a  just 
conclusion.  The  facts  which  he  will  be  able  to  make  sure  of, 
after  examining  an  episode  in  our  tariff  history,  will  often  be 
something  like  the  following.  Duties  Jhave  been  imposed  that 
Pjpved prohibitory^and imports havejceased;  the  simplest  test  of 
the  working  of  the  duties,  —  continuance  of  imports,  — is  thus 
noj^applicable.  A  domestic  industry  has  grown  up  and  has 
assumed  a  character  of  its  own,  very  probably  turning  out  com- 
modities of  grades  and  qualities  different  from  the  foreign.  The 
domestic  goods  have  been  cheapened;  but  so  have  the  foreign. 
Direct  competition  has  long  ceased;  the  two  sets  of  competitors 
have  gone  their  diverging  ways,  each  indifferent  to  the  other. 

1  Thus,  in  191 2,  there  was  opposition  to  a  proposed  reduction  in  duty  on  sewing 
machines,  even  though  they  had  long  been  exported  in  great  quantities;  because  some 
special  kinds  might  still  be  imported  from  Germany.  The  same  opposition,  under 
similar  conditions,  was  made  to  proposed  reductions  on  saws,  machine  tools,  elec- 
trical machinery,  —  all  of  them  articles  of  which  there  could  be  at  most  sporadic 
importations.  See  Hearings  before  the  Senate  Finance  Committee,  191 2,  on  Metal 
Duties,  pp.  172,  342,  1143,  1151. 


PROTECTION   TO   YOUNG  INDUSTRIES  2$ 

The  American  producers  allege  that  they  have  achieved  all  sorts 
of  wonderful  things,  and  the  evidence  may  be  strong  that  in  fact 
improvements  have  been  made  by  them.  Their  contentions 
rest,  though  without  their  saying  it  or  even  being  aware  of  it,  on 
the  young  industries  argument.  But  they  protest  vociferously 
against  the  slightest  reduction  of  duties,  asserting  in  the  same 
breath  that  they  have  distanced  the  foreigner  and  that  they  are 
in  mortal  fear  of  him.  Much  of  their  talk  is  obviously  exag- 
gerated. Experts  who  are^om^e^ejitlojcomgare  domesticjvares 
and  pricesjmthioreigri  arejioLj£a&y_lo_finji^and  whenjound  are 
not  jilwaysjiinbiased.  How  has  the  experiment  of  protection  to 
young  industries  really  worked  ?  The  test  of  abolishing  the 
duties  has  not  been  applied;  under  the  political  conditions,  very 
probably  it  is  out  of  the  question  that  it  should  be  applied.  To 
reach  a  clear  and  certain  conclusion  is  impossible.  The  best  that 
can  be  done,  after  interpreting  the  evidence  in  the  most  judicial 
spirit,  is  to  arrive  at  somejuiaMed  or  provisional  verdict. 

Not  infrequently  those  protectionists  who  put  forward,  more 
or  less  consciously,  thejojmj^indiisJzies  argument,  contend  that 
even  aftejLthe_siage  of  independence ;  is_ieached.  a  duty  should  be 
retained, jn  order  to  prevent  occasional  disastrous  importation.1 
It  is  said  that  even  though  the  domestic  industry  can  supply  the 
market  as  cheaply  as  it  could  be  supplied  byimportation-and  need 
not  fear  competition  in  ordinary  times,  protection  is  still  called 
for  because  in  times -of  depression  abroad  th^foreigner^ojjursJn 
goods  regardless  of  cost,  and  subjects  the  domestic  industry  to 
an  unfair  competition.  This  is  not  the  demand  for  support 
against  dumping  in  the  strict  sense,  —  that  is,  the  systematic 
and  continuous  disposal  of  goods  at  less  than  cost  or  less  than 
the  normal  price ;  it  rests  on  ajfear^f  j=p^ajmigilj^ 
suiting  from  "  overproduction  "  and  the  slaughtering  of  prices. 
Yet  it  would  seem  that  precisely  this  same  sort  of  disastrous 
competition  must  be  faced  at  home  also.     Trade  cycles  and  re- 

1  See  for  example  the  passage  from  Samuel  Batchelder's  writings  quoted  in  my 
Tariff  History,  p.  143  note.  Cf .  a  similar  utterance  by  Posadowsky,  a  conspicuous 
figure  among  German  protectionists,  quoted  by  Goldstein,  Der  deutsche  Eisenzoll 
(Volksw.  Zeitfragen,  no.  268),  p.  33. 


26  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

curring  periods  of  depression  are  peculiar  to  no  one  country. 
Overproduction  may  take  place  within  the  country;  every  in- 
dustry must  face _this^  possibility^ and_be  .prepared.  _io_take .  the 
lean  as  well  as  the  faL.  The  special  fear  of  the  price-cutting 
foreigner  doubtless  reflects  a  protectionist  feeling  which  goes  far 
beyond  the  limits  of  the  young  industries  argument,  —  a. feeling 
of  suspicion  ancLdislike.  against  foreign  supply  at  any  time  and 
"under  any  conditions.  The  truth  would  seem  to  be  that  the 
consequences  of  overproduction,  —  that  is,  of  miscalculations, 
mistakes,  unforeseen  changes  in  demand,  —  are  less  likely  to  be 
severe  in  proportion  as  the  sources  of  supply  are  larger  and  the 
markets  which  they  reach  are  wider.  An  international  market 
is  less  exposed  to  imctuations  than  a  narrower  domestic  one. 
What  is  obviously  true  of  such  commodities  as  wheat,  wool, 
sugar,  —  that  their  price  fluctuations  are  less  the  larger  the  area 
over  which  the  general  market  extends,  —  presumably  holds  of 
manufactured  goods  also.  Considerations  of  this  sort  cannot  be 
expected  to  appeal  to  the  root-and-branch  protectionist,  for 
whom  the  young  industries  is  only  one  among  many  arguments, 
and  perhaps  not  a  vital  one.  Those  who  have  no  general  terrors 
about  foreign  supplies,  and  are  unwilling  that  the  young  industries 
argument  in  favor  of  home  supply  should  be  pushed  beyond  its 
strict  limits,  will  consider  the  talk  about  foreign  overproduction 
as  mere  subterfuge,  as  a  retirement  to  an  entirely  different  and 
weaker  line  of  defense  after  the  first  and  strong  line  has  been  given 
up. 

There  remains  at  the  very  end  a  most  troublesome  question. 
fil  That  question  remains  even  if  it  be  proved,  either  by  the  con- 
clusive test  of  abolished  duties  or  by  other  evidence,  that  the 
protected  industry  has  finally  succeeded  in  offering  the  com- 
modity as  cheaply  as  it  could  be  supplied  by  the  foreigner. 
Would  not  this  same  result  have  come  in  any  event,  protection 
or  no  protection  ?  Do  not  other  causes,  perhaps  changes'  in  the 
generanHcTustTial  conditions  of  the  country,  explain  the  growth 
of  the  particular  industry  ?  To  answer  this  question,  a  careful 
examination  of  the  history  of  all  the  circumstances  is  necessary, 
and  a  reasonable  interpretation  of  the  course  of  events.     And 


PROTECTION   TO   YOUNG  INDUSTRIES  2J 

here  again  the  best  that  can  be  done  is  often  to  reach  a  qualified 
and  hesit^tingconclusion.  But  the  presumption,  at  this  stage 
of  the  debate,  may  be  said  to  be  against  the  staunch  free  trader. 
If  indeed  the  industry  has  failed  to  meet  its  obligations,  so  to 
speak;  if  it  clings  to  protection  indefinitely  and  refuses  ever  to 
meet  the  foreigner  on  even  terms,  —  then  the  presumption  is  the 
other  way;  it  is  against  the  advocate  of  protection  to  the  young 
industry.  But  if  the  industry  does  accept  the  challenge,  or  is 
clearly  able  to  do  so  without  danger  of  defeat,  then  the  free  trader 
who  maintains  that  all  the  protection  was  unnecessary,  and  that 
the  same  development  would  have  taken  place  in  any  case,  is 
fairly  called  on  to  show  just  how  and  why  it  would  have  taken 
place.  He  can  no  longer  rest  his  case  on  general  reasoning.  He 
must  consider  and  explain  the  actual  course  of  events. 

Enough  has  been  said  to  show  that  this  phase  of  economic  in- 
quiry demands  in  especial  degree  investigation  of  the  concrete 
facts.  Most  of  the  economists'  reasoning  about  international 
trade  is  deductive.  The  advantages  of  the  geographical  division 
of  labor;  the  relation  of  imports  to  exports,  and  the  flow  of  specie 
from  country  to  country;  the  equilibrium  of  international  pay- 
ments ;  the  doctrine  of  comparative  costs  (presently  to  be  con-  V^  T^""" 
sidered  in  some  detail) ;  the  nature  of  the  gain  from  international^fr^ 
trade;  tkgjiallaciousness »ofthe  vulgararguments  for  protection, —  • 
all  this  rests  mainly  on  reasoning  fromgeneral  principles.  There 
maybe  illustration  and  verification  from  the  facts,  and  indeed  such 
can  be  found  in  abundance;  but  the  core  of  the  reasoning  is  not 
statistical  or  historical  or  realistic.  This  holds  good  also  of  the 
very  first  stage  in  the  reasoning  about  protection  to  young  in- 
dustries. When  it  is  laid  down  that  protection  in  its  first  stage 
involves  a  burden  to  consumers,  and  a  loss  to  the  community 
because  of  a  diversion  of  labor  and  capital  into  channels  less 
advantageous,  the  proposition  rests  on  no  specific  evidence.  The 
ordinary  protectionist  would  deny  it  at  once ;  he  would  not  admit 
that  there  is  any  initial  loss  at  all;  he  would  talk  about  the  intrin- 
sic and  immediate  benefits  from  acquiring  a  new  industry,  about 
increased  demand  for  labor,  about  the  home  market,  and  so  on. 
The  only  way  to  deal  with  him  is  to  go  back  to  first  principles, 


28  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

and  alas!  to  repeat  the  most  elementary  analysis.  But  after 
passing  the  elementary  stage,  and  securing  (if  we  can)  an  admis- 
sion that  the  question  in  this  case  is  whether  an  initial  loss  is 
balanced  by  an  ultimate  gain,  we  can  no  longer  reason  in  the 
same  general  way.  Is  it  probable,  or  is  it  not,  that  eventually 
the  gain  will  come  ?  Is  domestic  progress  likely  to  be  quickened  ? 
Are  the  conditions  in  the  protecting  country  really  favorable  ? 
These  are  not  questions  to  be  answered  through  deductive  reason- 
ing in  terms  of  yes  or  no;  they  are  to  be  answered,  if  at  all,  through 
laborious  research  and  in  terms  of  probabilities. 

It  has  often  been  contended  by  free  traders  that  the  effect  of 
protection  is  to  retard  ^progress,  not  tojpromote  it.  Foreign 
c^n^etitjonJEgeJiaveJjeen  tolrl,  qukkensJihe^ domestic  producer. 
Injts  absence  heis- likely  to -stagnate.  Only  by  opening  the  field 
to  every  rival,  whether  within  the  country  or  without,  can  we 
secure  the  most  rapid  spread  of  improvements.  On  the  other 
hand,  the  young  industries  advocates  say  that  the  planting  of 
an  industry  in  a  new  country,  under  novel  conditions,  pulls  it 
out  of  its  routine  and  stimulates  improvement.  General  reason- 
ing  might  perhaps  incline  us  to  the  former  view.  A  priori  the 
most  effective  way  of  promoting  progress  would  seemtobe  to 
make  the  way  free  and  open  for  the  best  producer,  wherever  he 
may  be.  But  then  we  are  reminded  of  the  difficulties  of  new 
ventures,  and  so  on;  and  our  attention  is  called  to  the  analogy 
of  the  patent  system.  The  analogy  is  not  perfect,  since  the  pro- 
tection of  a  patent  is  not  granted  until  the  applicant  has  proved 
in  advance  that  he  really  has  evolved  something  new.  To  make 
the  case  of  protection  to  young  industries  strictly  analogous,  one 
would  have  to  require  from  the  applicant  proof  in  advance,  not 
after  the  event,  that  he  really  had  planned  distinct  improvements. 
None  the  less,  the  analogy  suggests  that  an  initial  privilege  to  a 
producer,  and  a  consequent  initial  burden  on  the  consumer,  may 
be  balanced  by  ultimate  gain.  The  question  becomes  one  of 
probabilities,  not  of  reasoning  straight  from  premise  to  conclusion. 

Illustrations  of  either  consequence,  —  of  the  retardation  of 
improvement  as  well  as  of  its  acceleration,  —  have  been  adduced 
from  industrial  history.     The  protective  system  of  France  before 


PROTECTION   TO   YOUNG  INDUSTRIES  29 

i860,  which  was  carried  for  many  articles  to  the  point  of  complete 
prohibition  of  imports,  is  said  to  have  caused  some  staple  manu- 
factures in  France  to  lag  behind  the  English.1  The  protective 
system  in  Germany  is  said,  on  the  other  hand,  to  have  caused  one 
of  the  staple  manufactures  —  that  of  iron  —  to  progress.2  It  is 
certain  that  since  the  adoption  of  the  protective  system  by  the 
German  Empire  in  1879  there  has  been  an  extraordinary  advance 
in  all  the  technique  and  organization  of  manufacturing  industry. 
In  the  United  States  it  has  been  declared  that  protection  of  the 
woolen  manufacture  after  the  civil  war  caused  old  plants  and 
antiquated  machinery  to  be  retained.3  Yet  in  general  it  is  as 
certain  in  the  case  of  the  United  States  as  in  that  of  Germany 
that  the  march  of  technical  improvement  has  been  extraordinarily 
rapid  during  the  period  of  the  maintenance  of  a  high  protective 
system.  What  may  be  the  cause  of  this  progress,  —  what  part 
protection  has  played,  —  is  doubtless  a  problem  extremely  diffi- 
cult of  solution;  but  at  least  it  calls  for  careful  inquiry  into  the 
particular  cases.  All  the  general  indications  from  the  economic 
history  of  the  United  States  are  that_protective  duties_jxMthe_ 
great  majority  of  cases  have  not  served  to  bol^rjLip_antiquated 
establishments  or  to  retard  improvements,;  though  it  may  not  be. 
so  clear  that  they  have  so_of ten  actually  stimulaiejijjrLpxavernent 
in  the  way  and  to  the  extent  contemplatedJ^the_youHg  indus- 
tries argument.  At  all  events  one  of  the  chief  objects  of  the 
following  pages  is  to  consider  with  care  the  history  of  some 
important  protected  industries,  and  reach  such  conclusion  as  can 
be  derived  by  the  only  method  applicable  to  this  sort  of  economic 
inquiry,  —  by  direct  investigation  of  the  particular  cases. 

See  Ame,  Les  Tarifs  de  douanes,  vol.  i,  pp.  318,  338,  399. 
Compare  what  is  said  below,  pp.  153  seq. 
Compare  what  is  said  below,  chapter  xxi,  p.  353. 


CHAPTER  III 

THE  TARIFF  AND  WAGES;    THE  PRINCIPLE  OF 
COMPARATIVE  ADVANTAGE 

The  doctrine  of  comparative  advantage,  —  or,  in  the  phrase 
more  commonly  used  by  the  older  school,  of  comparative  cost,  — 
has  underlain  almost  the  entire  discussion  of  international  trade 
at  the  hands  of  the  British  school.  It  has  received  singularly 
little  attention  from  the  economists  of  the  Continent,  and  some- 
times has  been  discussed  by  them  as  one  of  those  subtleties  that 
have  little  bearing  on  the  facts  of  industry.  I  believe  that  it 
has  not  only  theoretical  consistency,  but  direct  application  to  the 
facts;  and  that  in  particular  it  is  indispensable  for  explaining  the 
international  trade  of  the  United  States  and  the  working  of  our 
tariff  policy.  Neither  the  familiar  arguments  heard  in  our 
controversy  nor  the  course  of  our  industrial  history  can  be  under- 
stood unless  the  principle  of  comparative  advantage  is  clearly 
understood  and  kept  steadily  in  view. 

Briefly  stated,  the  doctrine  is  that  a  country_tends ;  underxondi- 
tions  of  freedom  to  devote  its  labor  and  capital  to  those  industries  in 
^wnlcliltheywork  to  greatest  effect.  It  wiUbe  found  unprofitable 
to~turrj7to  industries  in  which,  thoughjabor  and  capital  may  be 
employed  with  effect,  they  are  applied  with  less  effect  titan  in  the 
more  advantageous  industries.  The  principle  is  simple  enough, 
nor  is  it  applicable  solely  to  international  trade.  The  conversant 
reader  does  not  need  to  be  told  that  it  bears  on  the  division  of 
labor  between  individuals  as  well  as  on  that  between  nations. 
The  lawyer  finds  it  advantageous  to  turn  over  to  his  clerk  that 
work  which  he  could  do  as  well  as  the  clerk,  or  even  better,  con- 
fining himself  to  the  tasks  in  the  profession  for  which  he  has  by 
training  or  inborn  gift  still  greater  capacity.  The  able  business 
leader  delegates  to  foremen  and  superintendents  routine  work  of 
administration  that  he  could  doubtless  do  better  than  they;  he 
reserves  himself  for  the  larger  problems  of  business  management 
for  which  he  has  special  aptitude.     The  skilled  mechanic  often 

30 


THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAGE      3  I 

has  a  helper  to  whom  he  delegates  the  simpler  parts  of  his  trade, 
giving  his  own  attention  to  those  more  difficult  parts  in  which  he 
has  marked  superiority. 

In  international  trade,  however,  the  principle,  if  not  most  im- 
portant, needs  most  attention;  because  it  is  obscured  by  the 
extraordinary  persistence  of  prejudice  and  of  shallow  reasoning 
in  this  part  of  economics.  Simple  as  it  is  in  its  statement  and  in 
its  more  obvious  applications,  it  extends  to  some  complex  and 
difficult  problems,  and  more  particularly  to  those  concerning  the 
varying  ranges  of  prices  and  wages  in  different  countries.  There 
is  perhaps  no  topic  in  economics  on  which  there  is  more  of  popu- 
lar confusion  than  on  this ;  nor  can  it  be  said  that  there  is  always 
careful  and  consistent  thinking  on  it  among  economists  who  con- 
demn the  popular  superficialities.  Though  fallacies  of  much  the 
same  sort  are  prevalent  in  all  countries,  the  United  States  is  above 
all  that  for  which  the  principle  is  most  important  and  for  which 
there  is  most  need  of  explaining  the  connection  between  prices, 
wages,  and  the  currents  of  international  trade. 

Whatever  the  differences  of  opinion  among  economists  on  the 
theory  of  wages,  —  and  those  differences  are  less  in  reality  than 
in  appearance,  —  there  is  agreement  that  a  high  general  rate 
_wages  rests  upon  generalMgh-pioduct,  on  high^effectiveness_o 
industry.  It  is  not  necessary  here  to  enter  on  the  question 
whether,  in  speaking  of  the  effectiveness  of  industry,  we  should 
consider  precisely  in  what  way  it  can  be  said  to  be  based  on  the 
several  factors  in  production,  or  caused  by  them.  Some  econo- 
mists regard  capital  and  natural  resources  (land)  as  distinct 
factors,  contributing  each  its  specific  share  to  the  total  product 
of  industry.  Others  regard  them  simply  as  means  or  conditions 
for  enabling  labor  to  work  with  effect  and  so  to  turn  out  a  large 
product.  The  latter  seems  to  me  the  better  way  of  stating  the 
case,  —  that  labor  is  the  fundamental  agent  in  production;  but" 
for  the  present  purpose  it  is  not  material  which  form  of  statement 
is  preferred.  It  is  agreed  among  the  careful  thinkers  on  economics 
that  high  general  wages  and  a  high  degree  of  material  prosperity 
can  result  only  from  the  productive  application  of  labor;  good 
tools  or  good  natural  resources,  or  both,  being  indispensable  to 


32  SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

high  productivity.  And  when  "  labor  "  is  spoken  of,  it  must  be 
remembered  that  not  only  manual  labor  is  meant^but  the  equally 
important  labor  of  organizing  and  directing  the  rank  and  file. 
In  the  United  States  more  particularly,  the  general  effectiveness 
of  labor  depends  in  great  degree  on  the  work  of  the  industrial 
leaders. 

Now  when  there  prevails  a  general  high  range  of  wages,  due 
to  generally  productive  application  of  labor,  this  high  rate  comes 
to^be  considered  a  difficulty,  —  an  obstacle.  The  business  point 
of  view  is  commonly  taken  in  these  matters  not  only  by  the  busi- 
ness men  themselves,  but  by  the  rest  of  the  community.  To 
have  to  pay  high  wages  is  a  discouraging  thing  in  business;  does 
it  not  obviously  make  expenses  high,  and  competition  difficult  ? 
People  do  not  reflect  that  wages  are  not  high  as  a  matter  of  course. 
If  they  are  in  general  high,  there  must  be  some  general  cause. 
Once  established,  they  are  taken  in  a  country  like  the  United 
States  as  part  of  the  inevitable  order  of  things.  The  ordinary 
man  does  not  stop  to  consider  why  they  should  exist  at  all.  He 
regards  them  as  something  he  must  face,  and  too  often  as  some- 
thing that  constitutes  a  drawback  in  industry. 

When  speaking  of  wages  as  high,  we  may  have  in  mind  either_ 

pney  wages  or  commodity  wages  ("  real  "  wages,  in  the  older 
phrase).  It  is  familiar  to  all_that  money-wages  are  higher  in  the 
United  States  than  in  Europe;  and  it  is  almost  as  familiar  that 
the  greater  money  wages  are  by  no  means  completely  offset  by 
higher  prices,  and  that  there  remains  a  large  advantage  in  real  or 
commodity  wages.  Let  us  center  attention  for  the  moment  on 
this  latter  and  more  substantial  advantage,  —  the  higher  com- 
modity wages. 

It  is  obvious  that  higher  commodity  wages  cannot  be  handed 
over  to  workmen  by  employers  unless  the  workmen  (as  guided 
by  the  employers  and  aided  by  tools  and  machines)  turn  out  a 
large  product,  —  unless  there  is  greater  effectiveness  of  industry. 
I  say  effectiveness,  not  efficiency,  because  the  latter  word  has 
come  to  be  used  so  often  to  denote  one  particular  factor  that 
bears  on  the  quantity  of  product,  —  the  immediate  efficiency  of 
the  manual  workers;  by  no  means  the  sole  or  even  the  command- 


THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAGE      33 

ing  factor.  In  current  discussions  on  the  tariff  and  wages,  it  has 
often  been  alleged  that  in  one  industry  or  another  the  efficiency  or 
skill  of  the  workmen  is  no  greater  in  the  United  States  than  in 
England  or  Germany ;  that  the  tools  and  machines  are  no  better, 
the  raw  materials  no  cheaper.  How  then,  it  is  asked,  can  the 
Americans  get  higher  wages  unless  protected  against  the  competi- 
tion of  the  Europeans  ?  But,  it  may  be  asked  in  turn :  suppose 
all  the  Americans  were  not  a  whit  more  skilful  and  productive 
than  the  Europeans,  —  perhaps  quite  as  skilful,  but  not  more  so; 
suppose  the  plane  of  effectiveness  to  be  precisely  the  same 
throughout  the  realm  of  industry  in  the  countries  compared; 
how  could  wages  be  higher  in  the  United  States  ?  _The  source  of 
jdHhe_mccane_oLajcoj2^ 

industry.  If  its  industry  is  no  more  effective,  if  its  labor  pro- 
duces no  more,  than  in  another  community,  how  can  its  material 
prosperity  be  greater  and  how  can  wages  be  higher  ?  A  high 
general  rate  of  real  wages  could  not  possibly  be  maintained  unless 
there  were  in  its  industries  atlarge  a  high  ^general  productiveness. 

But  when  once  these  two  concomitant  phenomena  have  come 
to  exist,  —  a  high  effectiveness  of  industry  and  a  high  general 
rate  of  wages,  —  it  follows"  that  any  industry  in  which  labor  is 
not  effective,  in  which  the  plane  of  effectiveness  is  below  that  in 
most  industries,  finds  itself  from  the  business  point  of  view  at  a 
disadvantage.  It  must  meet  the  general  scale  of  wages  in  order 
to  attract  workmen ;  yet  the  workmen  do  not  produce  enough  to 
enable  that  general  scale  to  be  met  and  a  profit  still  secured. 
Such  an  industry,  in  the  terms  of  the  principle  now  under  dis- 
cussion, isjpso  facto  working  at  a  comparative  disadvantage.  In 
otherjndustries,  produi±isJiigJ^--thatis^iabor  cost  peX-UniLis 
lpw^  In  this  industry,  product  is  low;  labor  cost  is  high^  The 
industry  does  not  measureoip  to  th&.counlry's  standard^and  finds 
in  _that  standard  an_ohs±acle  to  its  prosecutiojL.^ 

Consider  the  same  problem,  —  the  relation  between  wages, 
costs,  prices,  —  from  the  point  of  view  of  money  wages.  Here 
again  we  are  beset  by  everyday  fallacies  and  superficialities. 
High  money  wages^  it  is  commonly  alleged,  cannot  be  paid  unless 
there  be  high  prices  fox  the  goods  made.     A  dear  man  is  supposed 


34  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

to  mean  a  dear  coat,  and  a  cheap  man  a  cheap  coat.     Yet  it  is 
beyond  dispute  that  in  the  United  States,  while  money  wages  are 
higher  than  in  European  countries,  the  prices  of  things  bought  are 
on  the  whole  not  higher.      Though  some  things  cost  more,  and 
higher  money  wages  thapfore  do  not  mean  commodity  wages 
higher  in  the  same  degree,  real  wages  remain  higher  by  a  substan- 
tial amount.    The  dear  man  may  perhaps  mean  a  dear  coat, — of 
this  we  shall  learn  more  when  we  come  to  consider  the  domestic 
conditions  of  production  for  clothing;  but  the  dear  man  certainly 
does  not  mean  dear  food,  and  probably  does  not  mean  a  dear  house. 
The  explanation  is  simple:  though  waffis_jn_jnongy  are  high, 
the  effectiveness  of  the  dear  man's  labor  on  the  whole  ]s  also  high, 
and  therefore  goods  on  the  whole  are  not  dear  A    Where  a  man  who 
is  paid  high  wages  turns  out  a  larger  number  of  pieces,  each  piece 
can  be  sold  at  a  low  price,  and  the  employer  still  can  afford  to  pay 
the  high  wages.    With  reference  to  individuals,  the  business  world 
is  constantly  accepting  this  principle.     A  good  man,  we  are  told, 
is  cheap,  even  at  high  wages.     To  use  "the  same  phrase,  a  good 
industry  is  cheap  even  though  high  wages  are  paid  in  it.     Where 
labor  is  effective^high  jvages and  low  prices  go  together.  \ 
""None  the  less,  an  established  high  rate  of  wages  always  presents 
itself  to  the  individual  employer  as  a  difficulty  that  has  to  be  over- 
come.    And  to  the  employee  it  presents  itself  as  a  thing  in  danger, 
—  something  that  must  always  be  jealously  guarded.     Yet  it  is  a 
real  difficulty  for  the  employer  only  where  the  effectiveness  of 
labor  is  not  great;  and  for  the  employees  also  it  needs  no  protec- 
tion, so  far  as  the  competition  of  foreign  products  is  concerned, 
where  this  same  essential  condition  is  found.      If,  indeed,  such 
effectiveness  does  not  exist,  then  the  American  employer  cannot 
pay  the  prevailing  high  rate  of  wages,  and  hold  his  own  in  free 
competition  with  producers  in  countries  of  lower  wages.    In  other 
words,  he  cannot  hold  his  own  unless  there  is  the  comparative 
advantage  in  his  particular  industry.      The  prevalence  of_. a 
general  high  rate  of  wages  is  due  to  the  fact  that  in  the  dominat- 
ing parts  of  the  country's  industrial  activity  the  comparative 
advantage  exists.     These  dominating  industries  set  the  pace;  in 
them  we  find  the  basis  of  the  high  scale  of  remuneration ;  it  is  they 


THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAGE      35 

which  establish  a  standaj^jvMch^ther^musLmeet,  and  which  jo 
the  others  presents  itself  as  an  obstacle. 

Some  further  explanation  of  these  general  statements  is  neces- 
sary before  they  can  be  made  to  fit  all  the  facts.  What  has  just 
been  said  of  dominating  industries  holdsf^ly  as  regards  those  in- 
dustries and  those  commodities  which  play  a  part  in  international 
trade. 

For  sundry  reasons,  many  articles  do  not  come  within  the 
range  of  international  dealings.  It  is  out  of  the  question  that 
they  should  be  exported  or  imported.  Such  are  bulky  articles, 
not  readily  transportable  for  any  distance,  like  bricks;  these  are 
necessarily  produced  near  the  spot  where  they  are  used.  Such 
again  are  articles  greatly  affected  by  national  habit,  like  furniture 
or  household  utensils;  and,  —  to  mention  a  highly  important 
class,  —  such  are  houses  and  house-room,  which  must  be  provided 
once  for  all  by  domestic  labor.  Things  of  this  sort  may  or  may 
not  be  higher  in  price  than  they  are  in  foreign  countries.  They 
are  made  by  labor  which  is  paid  the  current  high  rates  of  money 
wages.  If  that  labor  is  more  effective  than  in  foreign  countries, 
the  commodities  will  yet  be  lower  in  price  than  abroad.  But  if 
that  labor  is  not  effective  as  compared  with  similar  labor  in  for- 
eign countries,  the  commodities  will  be  higher  in  price.  Domestic 
commodities,  therefore,  —  meaning  by  that  phrase  the  com- 
modities which  are  necessarily  produced  within  the  country,  — ■ 
may  be  higher  in  price  than  they  are  in_  foreign  countries,  or  the 
same,  m  price,  or -even  lower  inprice^  according _to_the_^effective- 
ness  of  the  labor  engagecLin  producing  them,  If  by  some  change 
in  the  underlying  conditions,  —  say,  an  extraordinary  cheapening 
of^  transportation,  —  their  importation  were  to  become  feasible, 
the  employer  would  find  it  impossible  to  compete  with  foreigners 
unless  there  was  the  same  effectiveness  of  industry  in  producing 
them  as  there  was  in  the  dominant  industries.1 

1  So  far  as  money  wages  are  concerned,  the  dominating  industries  are  those 
which  export.  I  have  considered  this  problem  fully  in  a  paper  in  the  Quarterly 
Journal  of  Economics  (vol.  xx),  from  which  I  quote  the  following  paragraphs 
(pp.  510-51*);  — 

"  Those. countries  have  high  money  wages  whose  labor  is  efficient  in  producing 
exported  commodities,  and  whose  exported  commodities^onuTia^d_^_good_pjice__ 


36  SOME  ASPECTS  OF  THE   TARIFF  QUESTION 

As  regards  commodities  potentially  within  the  range  of  inter- 
national trade,  —  and  with  these  alone  the  tariff  controversy  is 
concerned,  —  the  principle  of  comparative  advantage  applies 
more  fully  and  unequivocally  to  the  United  States  than  to  any 
country  whose  conditions  are  known  to  me.  The  difference  in 
money  wages  between  the  United  States  and  European  countries  is 
marked;  the  difference  in  commodity  wages,  though  not  so  great, 
none  the  less  is  also  marked.  Notwithstanding  these  high  wages, 
constituting  anapjiaxeiLt^  obstacle  or  handicap  for  the  domes- 
tic producerfthe  United  States  steadily  exports  all  sorts  of 
commodities;  not  only  agricultural  products,  but  manufactures  of 
various  kinds.  Evidently  they  could  not^be  exported  unless  they 
were  sold  abroad  as  cheaply  as  foreign  goods  of  the  same  sort  are 


in  the  world's  markets.  The  general  range~of  money  incomes  depends  fundamen- 
tally on  the  conditions  of  international  trade,  and  on  those  conditions  only.  The 
range  of  domestic  prices  then  follows:  it  is  high  so  far  as  the  efficiency  of  labor 
in  domestic  commodities  is  small,  low  so  far  as  the  efficiency  of  labor  in  domestic 
commodities  is  great. 

"  The  situation  is  simplest  in  the  case,  —  difficult  to  find  in  the  real  world,  but 
instructive  for  illustration  of  the  principle,  —  of  a  country  having  a  monopoly  of  a 
given  article  of  export  or  set  of  exported  articles.  By  monopoly,  I  mean  here  not 
that  the  producers  within  the  country  fail  to  compete  effectively  among  themselves, 
but  that  the  producers  of  no  other  country  compete  with  them.  The  price  of 
such  exported  articles  would  depend,  in  the  manner  with  which  the  reader  may  be 
supposed  familiar,  on  the  equation  of  international  demand.  The  more  the  con- 
sumers in  other  countries  care  for  them,  the  higher  will  their  prices  be  pushed.  The 
less  the  labor  with  which  these  articles  are  produced  at  home,  the  higher  will  be 
the  money  wages  resulting  from  these  high  prices.  The  higher  money  wages  in 
the  exporting  industries  will  set  the  standard  for  money  wages  in  the  country  at 
large;  and  the  general  high  wages  may  or  may  not  be  accompanied,  as  already 
explained,  by  high  domestic  prices. 

"  Where  a  country  exports  in  competition  with  other  countries,  —  the  well- 
nigh  universal  case,  —  the  same  forces  are  at  work.  The  prices  at  which  the 
exports  are  sold  depend  on  the  world  demand  for  the  commodity.  In  that  world 
demand,  or,  to  speak  more  carefully,  interplay  of  demand,  the  extent  to  which  the 
consumers  in  the  several  countries  care  for  the  articles  imported  into  them  deter- 
mines which  countries  shall  sell  their  exports  on  advantageous  terms.  Those 
countries  whose  exports  are  in  most  urgent  demand  will  have  the  greatest  possi- 
bility of  high  money  incomes.  Whether  they  will  have  high  incomes  in  fact, 
depends  on  the  labor  cost  of  their  exports.  The  wheat  which  is  exported  both 
by  the  United  States  and  by  Russia  sells  at  the  same  price;  but  that  price  means 
large  money  returns  in  the  country  of  machinery,  efficient  labor,  and  cheap  internal 
transportation,  and  low  money  returns  in  the  country  which  lacks  these  advan- 
tages." 


THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAGE      37 

there  sold.  That  these  products  of  highly  paid  labor  are  exported 
and  are  sold  cheap,  is  proof  that  American  industry  has  in  them  a 
comparative  advantage.  Thej£  are_other  goods  which,  though 
not  exported,  are  also  not  imported;  goods  where  thebalance  of 
advantage  is  even,  so  to  speak.  They  are  not  such  as  are  ruled 
out  of  the  sphere  of  international  trade  once  for  all,  because  of 
great  bulk  or  necessity  of  production  in  situ;  they  might  con- 
ceivably be  imported;  yet  in  fact  they  are  not  imported.  These 
are  the  products  of  industries  in  which  American  labor  is  effective, 
yet  not  effective  to  the  highest  pitch;  effective  in  proportion  to 
the  higher  range  of  money  wages  in  the  country,  but  barely  in 
that  proportion.  And  finally  there  are  the  goods  whose  importa- 
tion continues,  even  though'  there  is  no  obvious  obstacle  to  their 
domestic  production  trom  soil  or  climate.  These  are  things 
which,  it  would  seem,  could  be  produced  to  as  good  advantage  at 
home  as  abroad.  They  could  be  produced  to  as  good  advantage; 
but  they  lack  the  comparative  advantage.  They  do  not  measure 
up  to  the  standard  set  by  the  dominant  industries.  The  obstacle 
to  their  successful  prosecution  within  the  country  is  not  physical 
but  economic.  It  is  they  which  find  in  high  wages  an  insuperable 
difficulty.  In  this  class belong  the.  indu^rie„sjwhkL^areL pro- 
tected, and  which  would  not  hold  their  own  wi thoutjDroieetion. 
They  are  in  a  position  analogous  to  that  of  the  strictly  domestic 
industries  in  which  labor  is  not  effective,  but  which,  being  carried 
on  of  necessity  within  the  country,  have  high  prices  made  neces- 
sary by  high  money  wages.  The  obvious  difference  between  the 
two  cases  is  that  the  force  which  causes  the  strictly  domestic 
industries  to  be  carried  on  is  an  unalterable  one,  such  as  the  diffi- 
culty or  impossibility  of  transportation ;  while  that  which  causes 
the  protected  industry  to  become  domesticated  is  the  artificial 
one  of  a  legislative  barrier. 

What,  now,  are  the  causes  of  industrial  effectiveness  and  com- 
parative advantage  ?  To  put  the  question  in  other  words,  what 
are  the  industries  in  which  a  comparative  advantage  is  likely  to 
appear  ?  and,  more  particularly,  in  what  directions  is  the  labor 
of  the  people  of  the  United  States  likely  to  be  applied  with  special 
effectiveness  ? 


38  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

The  more  common  answer  has  been,  in  agriculture.  A  new 
country,  with  abundance  of  fertile  land,  finds  its  labor  most 
effective  in  the  extractive  industries.  Hence  the  United  States 
long  were  steady  exporters  of  wheat,  meat  products,  cotton. 
Hence  Canada  is  now  a  heavy  exporter  of  wheat.  Wheat  is 
specially  adapted  to  extensive  culture,  and  is  easily  transportable; 
it  is  the  commodity  for  which  nature  gives  to  a  new  country  in 
the  temperate  zone  a  clear  comparative  advantage.  The  inter- 
national trade  of  the  United  States  was  long  determined  chiefly 
by  the  country's  special  advantages  for  the  production  of  wheat 
and  similar  agricultural  staples. 

/  It  should  be  noted,  however,  that  not  only  the  natural  re- 
sources told,  but  the  manner  in  which  they  were  used.  From 
the  first,  inventiveness  and  ingenuity  were  shown.  The  United 
States  early  became  the  great  country  of  agricultural  machinery. 
Especially  during  the  second  half  of  the  nineteenth  century,  the 
skill  of  the  makers  of  agricultural  implements  and  the  intelligence 
of  the  farmers  who  used  the  implements  were  factors  not  less  im- 
portant than  the  great  stretches  of  new  landr  Still  anotherjactor 
of  importance  was  the  cheapening  of  transportation.  From  the 
very  beginning,  the  Americans  have  been  energetic  and  success- 
ful in  overcoming  the  vast  distances  of  their  country.  Our  rail- 
roads have  cheapened  long  hauls  as  nowhere  else.  The  most 
striking  improvements  of  this  sort  were  made  in  the  last  third 
of  the  nineteenth  century;  then  new  lands  were  opened,  and 
agricultural  products  exported,  on  a  scale  not  before  thought  pos- 
sible. When  the  effectiveness  of  labor  is  spoken  of,  the  effective- 
ness of  all  the  labor  needed  to  bring  an  article  to  market  is  meant; 
not  merely  that  of  the  labor  immediately  and  obviously  applied 
(like  that  of  the  farmer),  but  that  of  the  inventor  and  maker  of 
$-*-.  threshing-machines  and^aa^lows,  and  that  of  the  manager  and 
/  y  worker  on  the  railways  and  ships.     In  other  industries  even  more 

markedly  than  in  agriculture,  the  labor  of  the  directing  heads,  of 
the  planners  and  designers,  tells  in  high  degree  for  the  final  effec- 
tiveness of  the  labor  which  is  applied  through  all  the  successive 
stages. 


^>y 


THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAGE      39 

That  the  situation  began  to  change  with  the  opening  of  the 
twentieth  century  does  not  need  to  be  explained  at  length. 
The  period  of  limitless  free  land  was  then  passed,  and  with  it  the 
possibility  of  increasing  agricultural  production  under  the  spe- 
cially advantageous  conditions  of  new  countries.  For  one  great 
agricultural  article  —  cotton  —  the  comparative  advantage  of  the 
country  indeed  maintained  itself,  and  its  exports  continued  to 
play  a  great  part  in  international  trade.  The  exports  of  other 
agricultural  products,  —  wheat,  corn,  barley,  meat  products,  — 
have  by  no  means  ceased,  nor  will  they  cease  for  some  time.  But 
they  tend  to  decline,  absolutely  and  even  more  relatively.  Other 
articles  grow  in  importance,  such  as  copper,  petroleum,  iron  and 
steel  products,  various  manufactures.  For  some  of  these,  — 
copper,  for  example,  —  the  richness  of  our  natural  resources  is 
doubtless  of  controlling  importance.  But  the  manner  in  which 
those  natural  resources  are  turned  to  account  is  in  all  cases  im- 
portant; and  in  many  cases  the  comparative  advantage  of  which 
the  exports  are  proof  rests  not  on  the  favor  of  nature  at  all,  but 
solely  on  the  better  application  of  labor  under  conditions  inher- 
ently no  more  pjromising_than  those  of  other  countries.  What 
are  the  causes  of  advantage  under  these  less  simple  condi- 
tions ? 

The  same  question  may  be  asked  regarding  a  closely-allied 
phenomenon,  referred  to  a  moment  ago.  A  considerable  range  of 
manufactured  articles,  though  not  exported,  are  yet  not  imported. 
The  domestic  manufacturer  holds  the  domestic  market  with  ease, 
while  paying  higher  wages  than  his  foreign  competitor.  The 
range  of  such  industries  is  wider  than  is  commonly  supposed.  It 
is  obscured  by  the  fact  that  our  tariff  system  imposes  needless  and 
inoperative  duties  on  a  quantity  of  things  which  would  not  be 
imported  even  in  the  absence  of  duties.  On  the  other  hand  there 
is  a  considerable  range  of  articles  on  which  the  duties  do  have  sub- 
stantial effect,  —  articles  which  would  be  imported  but  for  the 
tariff.  Some  of  these  continue  to  be  imported  notwithstanding 
high  duties;  they  pour  in  over  the  tariff  wall.  Why  the  dif- 
ference between  the  two  sets  of  cases :  those  in  which  the  domestic 
manufacturer  holds  his  own  irrespective  of  duties,  and  those  in 


4-0  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

which  he  needs  the  duties  or  even  is  beaten  notwithstanding  the 
tariff  support  ? 

The  answer  commonly  given  is  that  American  producers  can 
hold  their  own  more  easily  when  much  machinery  is  used.  Then, 
it  is  said,  the  wages  bill  forms  a  smaller  proportion  of  the  expenses 
of  production,  and  the  higher  wages  of  the  United  States  are  a 
less  serious  obstacle.  But  it  requires  no  great  economic  insight 
to  see  that  this  only  pushes  the  question  back  a  step.  Why  is 
not  the  machinery  itself  more  expensive  ?  The  machinery  was 
made  by  labor.  It  is  a  commonplace  that  a  commodity  made 
with  much  use  of  machinery  is  the  combined  product  of  two  sets  of 
laborers,  —  those  who  make  the  instruments  and  those  who 
operate  them.  If  all  those  whose  labor  is  combined  for  producing 
the  final  result  are  paid  higher  wages  than  in  foreign  countries, 
why  cannot  the  foreigners  undersell  where  much  machinery  is 
used  as  well  as  where  little  is  used  ? 

The  real  reason  why  Americans  are  more  likely  to  hold  their 
own.  where  machinery  is  much  used,  and  where  hand  labor  plays 
a  comparatively  small  part  in  the  expenses  of  production,  is  that 
Americans  make  and  use  machinery  hetter.  They  turn  to  labor- 
saving  devices  more  quickly,  and  they  use  devices  that  save  more 
labor.  Where  Americans  can  apply  machinery,  they  do  so;  and 
not  only  do  so,  but  do  so  better,  on  the  whole,  than  their  foreign 
competitors.  The  question  remains  one  of  comparative  effec- 
tiveness. Their  machinery  is  not  necessarily  cheaper;  absolutely 
often  it  is  dearer;  but  it  is  cheap  relatively  to  its  effectiveness. 
It  is  better  machinery,  and  the  labor  that  operates  it  turns  out  in 
the  end  a  product  that  costs  not  more,  but  less,  than  the  same 
product  costs  in  countries  using  no  such  devices,  or  using  devices 
not  so  good. 

In  general,  it  may  be  laid  down  that  this  sort  of  comparative 
advantage  is  most  likely  to  appear  in  the  United  States  in  two 
classes  of  industries,  —  those  that  turn  out  large  quantities  of 
staple  homogeneous  commodities  and  those  that  themselves 
make  tools  and  machinery.  Only  where  many  identical  things 
are  turned  out,  does  it  pay  to  construct  an  elaborate  and  expen- 
sive plant.     A  machine-using  people  directs  its  energies  to  best 


I 

THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAi 

advantage  where  thousands  of  goods  of  the  same  pattern  are  to 
be  produced.  Hence  the  repeated  experience  that,  notwithstand- 
ing high  duties,  there  is  a  tendency  to  import  specialties  and  goods 
salable  in  small  quantities  odW  Goods  used  by  the  masses  in 
large  quantities,  as  distingujsned  from  luxuries  bought  by  the 
comparatively  few  who  are  rich,  are  likely  to  be  produced  at 
home,  without  danger  of  being  pushed  by  competing  imports.  If 
specialties,  such  as  goods  made  to  order,  must  be  supplied  by 
domestic  producers,  they  are  likely  to  be  what  the  customer 
thinks  inordinately  dear;  because  they  are  made  preponderantly, 
or  at  least  in  greater  degree,  by  hand  labor  which  is  paid  high 
wages  and  which  by  the  very  conditions  of  the  case  cannot  use 
labor-saving  machinery.  Again,  implements  themselves,  big  and 
little,  are  likely  to  be  well  made  in  a  country  where  people  are 
constantly  turning  to  machinery;  from  kitchen  utensils  and 
household  hardware  to  machine  tools,  electric  apparatus,  and 
huge  printing  presses.  These  are  things  in  which  the  success  of 
American  industry  is  familiar;  which  are  exported,  not  imported; 
in  which  it  is  proverbial  that  the  Yankee  has  a  peculiar  knack,  — ■ 
another  way  of  saying  that  he  has  a  comparative  advantage. 
"^  The  relation  between-high,  wages  and  the^  use  jj£  machinery 
calls  for  ajword  more  of  explanation.  It  is  usually  said  that 
high  wages  are  a  cause  of  the  adoption  of  machinery,  and  that  we 
find  here  the  explanation  of  the  greater  use  of  machinery  in  the 
United  States.  I  believe  that  the  relation  is  the  reverse;  .high 
wages  are  the  effect,  not  the  cause.  To  the  individual  manu- 
facturer it  may  seem  a  cause;  he  schemes  to  save  in  the  wages 
bill  by  adopting  a  labor-saving  device.  But  the  reason  whyjhe 
is  induced  to  scheme  is  that  labor-saving  devices  are  in  com- 
mon use  and  that  the  effectiveness  of  industry  at  large  is  there- 
fore great,  —  hence  high  wages.  No  doubt  the  general  situation 
has  its  reflex  influence  on  the  individual.  Every  one  is  put  to 
his  trumps;  every  one  feels  the  need  of  playing  the  industrial 
game  at  its  best.  The  abundant  resources  which  so  long  contrib- 
uted greatly,  and  indeed  still  contribute,  to  making  labor  pro- 
ductive and  wages  high,  thereby  stimulated  the  introduction  of 
labor-saving  methods  in  industries  not  so  directly  affected  by  the 


ASPECTS  OF  THE  TARIFF  QUESTION 

?e.     But  the  fundamental  cause  of  the  prevalent 

;ry  warin  the  intelligence  and  ^ventiveness  of  _the 

being  promoted  again  by  the  breath  of  freedom 

3n  in  all  their  affairs.      What  are  the  ultimate 

causes  of  industrial  progress  and  industrial  effectiveness  is  not 

easily  stated;  complex  historical,  political,  perhaps  ethnographic 

forces  must  be  reckoned  with.     But  these  causes  work  out  their 

results  in  modern  times  largely  by  prompting  men  to  improve 

iheir  implements  and  to  use  unhesitatingly  new  and  better  imple- 

ments.     Thence  flows  a  high  rate  of  return  for  their  labor;  it  is 

not  the  high  rate  of  return  that  leads  them  to  use  the  better  tools. 

In  creating  and  maintaining  the  comparative  advantage  which 
comes  from  the  better  application  of  the  machine  processes,  the 
business  man  —  the  industrial  leader  —  has  become  in  recent 
vimes  a  more  and  more  important  factor.  The  efficiency  of  the 
individual  workman  has  been  much  dwelt  on  in  discussion  of  the 
rivalries  of  different  countries:  aptitude,  skill,  intelligence,  alert- 
ness, perhaps  inherited  traits.  No  doubt  qualities  of  this  sort 
have  counted  in  the  international  trade  of  the  United  States, 
and  still  count.  The  American  mechanic  is  a  handy  fellow,  —  it 
is  from  his  ranks  that  the  inventors  and  business  leaders  have 
been  largely  recruited,  —  and  he  can  run  a  machine  so  as  to  make 
it  work  at  its  best.  But  there  is  a  steady  tendency  to  make 
machinery  automatic,  and  largely  independent  of  the  skill  of  the 
operative  who  runs  it.  The  mechanics  who  construct  the  ma- 
chines and  keep  them  in  repair  must  indeed  be  highly  skilled. 
Once,  however,  the  elaborate  machine  is  constructed  and  kept 
in  perfect  running  order,  the  operative  simply  needs  to  be  assidu- 
ous. Under  such  circumstances  the  essential  basis  of  a  compara- 
tive advantage  in  the  machine-using  industries  is  found  in 
--.management,  —  in  invention,  rapid  adoption  of  the  best  devices, 
organization. 

The  business  leader  has  been  throughout  a  person  of  greater 
consequence  in  the  United  States  than  elsewhere.  He  has 
loomed  up  large  in  social  consequence  because  he  has  been  of 
the  first  economic  consequence.  He  has  constructed  the  railway, 
and  opened  up  the  country;   he  has  contributed  immensely  to 


THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAGE      43 

the  utilization  of  the  great  agricultural  resources;  he  has  led  and 
guided  the  inventor  and  mechanic.  I  am  far  from  being  disposed 
to  sing  his  praises;  there  are  sins  enough  to  be  laid  to  his  account. 
But  he  has  played  an  enormously  effective  part  in  giving  Ameri- 
can industry  its  special  characteristics.  His  part  is  no  less 
decisive  now  than  it  was  in  former  times,  —  nay,  more  so.  The 
labor  conditions  brought  about  by  the  enormous  immigration  of 
recent  decades  have  put  at  his  disposal  a  vast  supply  of  docile, 
assiduous,  untrained  workmen.  He  has  adapted  his  methods 
of  production  to  the  new  situation.  His  own  energy,  and  the 
ingenuity  and  attention  of  his  engineers  and  inventors  and  me- 
chanics, have  been  directed  to  devising  machinery  that  will 
almost  run  itself.  Here  the  newly-arrived  immigrant  can  be 
used.  So  far  as  the  American  can  do  this  sort  of  machinery 
making  to  peculiar  advantage,  so  far  can  he  pay  wages  to  the 
immigrants  on  the  higher  American  scale  and  yet  hold  his  own 
against  the  European  competitor  who  pays  lower  wages  to  the 
immigrant's  stay-at-home  fellow.  But  it  is  on  this  condition  only 
that  he  can  afford  to  pay  the  green  hand  wages  on  the  American 
scale,  or  on  some  approach  to  it:  he  must  make  the  total  labor 
more  effective.  The  main  cause  of  greater  effectiveness  in  the 
dominating  industries  is  to  be  found,  under  the  economic  condi- 
tions of  recent  times,  not  so  much  in  the  industrial  quality  of  the 
rank  and  file  as  in  that  of  the  technical  and  business  leaden 

Similar  reasoning  is  applicable  to  another  cause  of  effectiveness 
in  industry  which  has  been  much  discussed  of  late,  —  "  scientific 
management."  Some  persons  believe  that  here  is  a  panacea 
of  universal  application;  any  and  every  industry  can  be  made 
more  effective  by  systematic  observation  and  experiment  on  each 
of  its  steps  and  management  based  thereon.  With  reference  to 
the  protective  system  it  was  maintained,  for  example,  after  the 
reduction  of  duties  in  the  tariff  act  of  19 13,  that  scientific  manage- 
ment, if  generally  adopted,  would  enable  all  American  industries 
to  meet  the  new  and  sharp  competition  of  foreigners.  The 
truth  is  that  here  also  the  question  is  one  of  comparative  advan- 
tage. Scientific  management  is  likely  to  tell  more  in  some  in- 
dustries than  in  others.     Apparently  it  tells  most  in  industries 


44  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

of  the  standardized  type,  —  precisely  those  in  which  industrial 
leadership  already  has  proved  of  cardinal  importance  and  in 
which  Americans  have  already  shown  the  greatest  aptitude  for 
leadership.  It  implies  large-scale  operation;  since  the  heavy 
expense  of  preliminary  investigation  and  the  enlarged  super- 
visory staff  are  worth  while  only  if  the  expense  is  spread  over  a 
large  output.  It  is  adapted  not  to  industries  which  produce 
specialties  or  small  lots  of  numerous  and  varied  articles,  but  to 
those  in  which  the  steady  repetition  of  the  same  operations  makes 
it  profitable  to  work  out  an  elaborate  system.  The  indications 
are  that  it  will  not  radically  change  the  character  of  American 
manufacturing  industry  or  modify  the  division  between  domestic 
and  foreign  sources  of  supply.  Rather  is  it  likely  to  accentuate 
existing  relations;  to  strengthen  American  industry  where  it  is 
already  strong.  Not  all  industries  equally  will  feel  its  influence, 
but  those  in  which  this  special  form  of  industrial  leadership  tells 
with  special  effectiveness. 

Returning  now  to  the  invention  and  operation  of  machinery,  we 
have  to  consider  a  further  possibility,  —  one  which  has  played  a 
Considerable  part  in  recent  tariff  discussions.  The  more  ma- 
chinery becomes  automatic,  the  more  readily  can  it  be  trans- 
planted. Is  there  not  a  likelihood  that  apparatus  which  is  almost 
self-acting  will  be  carried  off  to  countries  of  low  wages,  and  there 
used  for  producing  articles  at  lower  price  than  is  possible  in  the 
country  of  high  wages  where  the  apparatus  has  originated  ?  In 
hearings  before  our  congressional  committees  a  fear  is  often  ex- 
pressed that  American  inventors  and  tool-makers  will  find  them- 
selves in  such  a  plight.  An  American  firm,  it  is  said,  will  devise  a 
new  machine,  and  an  export  of  the  machine  itself  or  of  its  products 
will  set  in.  Then  some  German  will  buy  a  specimen  and  repro- 
duce the  machine  in  his  own  country  (the  Germans  have  been 
usually  complained  of  as  the  arch  plagiarists;  very  recently,  the 
Japanese  also  are  held  up  in  terrorem).  Soon  not  only  will  the 
1  ports  cease,  but  the  machine  itself  will  be  operated  in  Germany 
by  low-paid  labor,  and  the  articles  made  by  its  aid  will  be  sent 
back  to  the  United  States.      Shoe  machinery  and  knitting  ma- 

inery  have  been  cited  in  illustration.     The  identical  apparatus 


THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAGE      45 

which  has  been  brought  in  the  United  States  to  extraordinary- 
perfection  is  sent  to  Europe  (perhaps  even  made  in  Europe  by  the 
American  manufacturer),  and  is  there  worked  by  cheaper  labor. 
The  automatic  looms,  again,  which  have  so  strikingly  influenced 
the  textile  industry  of  the  United  States,  and  so  much  increased 
its  effectiveness,1  are  making  their  way  to  Europe,  —  here  again 
being  pushed  into  use  by  the  American  loom  makers  themselves. 
Is  it  not  to  be  expected  that  they  will  be  operated  by  cheaper 
English  and  German  and  French  labor,  and  that  their  products 
will  be  shipped  back  to  the  United  States,  to  the  destruction  of 
the  very  American  industry  which  they  had  first  made  strong 
and  independent  ? 

This  possibility  is  subject  to  exaggeration.  It  is  not  so  easy 
as  might  be  supposed  to  transplant  an  improved  system  of  pro- 
duction and  all  that  hangs  thereby.  However  automatic  a 
machine  may  be,  intelligence  and  knack  in  operating  it  are 
always  called  for  ^though  less,  perhaps,  among  the  ordinary  hands 
than  among  the  machine  tenders  and  foremen.  It  is  a  common 
experience  that  the  same  machinery  will  produce  in  the  country 
of  its  invention  and  manufacture  better  results  than  when  trans- 
planted. Those  very  automatic  looms,  just  referred  to,  are 
making  their  way  very  slowly  into  Europe.  They  do  not  fit  into 
the  traditional  industrial  practices,  and  do  not  accomplish  what 
they  accomplish  in  the  United  States.  The  difficulties  which 
impede  the  transfer  of  machinery  and  methods,  however  per- 
fected and  however  available  for  every  applicant,  are  most  strik-  ^V  ? 
ingly  illustrated  in  the  rivalry  of  the  Orient.  We  hear  frequently 
of  the  menace  of  the  cheap  labor  of  China,  India,  Japan.  Will 
not  these  countries  deluge  us  with  the  products  of  cheap  factory 
labor,  when  once  they  have  equipped  themselves  with  the  latest 
machinery  ?  The  truth  is  that  they  will  in  all  probability  never 
thus  equip  themselves.  To  do  so,  would  require  more  than  the 
mere  shipment  of  the  machinery  and  the  directions  for  working  it. 
A  completely  different  industrial  environment  would  need  to  be 
transplanted.  The  yellow  peril  has  been  as  much  exaggerated  in 
its  economic  possibilities  as  in  its  military. 

1  See  below,  pp.  273  seq. 


46  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

None  the  less,  some  possibility  of  this  sort  does  exist,  especially 
in  the  rivalry  between  those  countries  of  advanced  civilization 
which  are  more  nearly  on  the  same  industrial  level.  It  is  by  no 
means  out  of  the  question  that  shoe  machinery  or  automatic 
looms  shall  be  worked  as  well  in  Germany  as  in  the  United  States. 
Supposing  this  to  be  done,  cannot  the  German  employer  who 
gets  his  operatives  at  low  wages  undersell  the  American  employer 
who  must  pay  high  wages  ?  Is  not  the  comparative  advantage 
which  the  United  States  possesses  in  its  ingenious  machinery 
necessarily  an  elusive  one,  sure  to  slip  away  in  time  ?  An 
advantage  may  indeed  be  retained  indefinitely  where  skill  or 
intelligence  on  the  part  of  the  individual  workmen  are  necessary. 
Even  here  there  is  a  doubt  whether  it  will  persist,  in  view  of  the 
spread  of  education  and  technical  training  the  world  over.  At 
all  events,  in  the  widening  range  of  industries  where  the  work- 
man merely  tends  semi-automatic  machinery,  the  manufacturing 
industries  of  the  country  having  high  wages  would  seem  to  be  in 
a  perilous  situation. 

The  only  answer  which  can  be  given  to  questioning  of  this  sort 
is  that  the  leading  country  must  retain  its Jead.  As  fast  as  other 
countries  adopt  the  known  and  tried  improvements,  it  must 
introduce  new  improvements.  Unrelaxed  progress  is  essential 
to  sustained  superiority;  he  who  stands  still  inevitably  loses  first 
place.  Such  was  in  the  main  the  relation  between  England  and 
the  other  western  countries  during  the  first  three-quarters  of  the 
nineteenth  century.  English  machinery  was  exported  and  Eng- 
lish methods  were  copied  throughout  the  world,  but  the  lead  of 
the  British  was  none  the  less  maintained.     As  fast  as  the  other 

4 

countries  adopted  the  devices  which  originated  in  England,  that 
country  advanced  with  new  inventions  or  with  goods  of  new 
grades.  A  similar  relation  seems  to  exist  at  the  present  time 
between  Germany  and  the  other  countries  which  follow  her  lead 
in  some  of  the  chemical  industries.1  It  appears  also  in  the  posi- 
tion of  the  United  States  in  those  manufacturing  industries  which 
contribute  to  our  exports.  As  fast  as  the  American  devices  are 
copied  elsewhere,  still  other  improvements  must  be  introduced. 

1  See  a  passage  quoted  in  my  Tariff  History,  p.  393,  note. 


THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAGE      47 

This  will  seem  to  the  American  manufacturer  a  harsh  sentence, 
and  a  heartless  or  unpatriotic  one  to  the  ordinary  protectionist. 
What  ?  To  be  deprived  of  the  fruits  of  our  own  enterprise  and 
ingenuity,  without  protection  from  a  paternal  government 
against  the  interlopers  ?  Yet  I  see  no  other  answer  consistent 
with  the  general  reasoning  of  economics  on  international  trade  and 
the  geographical  division  of  labor.  The_gain  whic^a^ountry 
secures  from  its  labor  is  largest  when  that  labor  is  applied  in  the 
most  effective  way;  and  labor  is  applied  with _  the  greatest  effec- 
tiveness only  when  it  proves  tHs^ffectiyeness  by  sustained  ability 
to_hold  the  field  constantly  against  all  rivals. 

This  train  of  reasoning,  however,  can  be  carried  further.  It  is 
conceivable  that  improvements  and  inventions  will  be  so  com- 
pletely adopted  by  all  the  advanced  countries  as  to  bring  about 
an  equalization  in  their  industrial  conditions;  which  of  necessity 
would  lessen  the  volume  and  the  importance  of  trade  between 
them.  Where  an  invention  is  introduced  in  a  single  country,  it 
gives  that  country  at  the  outset  a  comparative  advantage,  leads 
to  exports,  and  swells  the  volume  of  international  trade.  When 
the  invention  comes  into  international  use,  however,  the  industry 
which  it  serves  may  drift  toward  the  countries  of  low  wages;  and 
these  then  may  export  the  products.  May  export  them,  be  it 
observed;  for  this  tendency  is  greatly  checked  by  those  obstacles 
to  imitation  and  transplanting  which  have  just  been  referred  to. 
But  suppose  the  tendency  not  to  be  checked:  suppose  that  each 
and  every  new  device  comes  to  be  adopted  in  all  countries,  and 
used  in  all  with  equal  effectiveness.  Then  the  ultimate  conse- 
quences will  be  different  from  those  that  nowadays  follow  the 
introduction  of  improvements.  No  one  countrywill  then  ^possess 
advantages  in^rrianufactures  over^Qthers_L-no_one  will  be  able  to 
export  to  another;  trade  between  them  in  manufactured  goods, — 
if^the  assumed  conditions  hold  absolutely,  —  will  cease.  -All  \ 
countries  wm  secure.  jn_  the  samejdegreejhe  benefit  of  the  uni- 
versall'^d  inventions. 

Such  would  be  the  inevitable  outcome  of  complete  equalization 
of  the  effectiveness  of  labor.  The  total  income  of  a  community  is 
the  pr  >duct  of  its  industry,  —  in  the  last  analysis,  of  its  labor.     If 


48  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

labor  is  equally  productive  everywhere,  differences  in  prosperity 
will  cease.  Then  there  will  be  no  room  for  comparative  advan- 
tages based  on  invention,  peculiar  effectiveness,  better  machinery; 
more  skilful  organization.  The  only  trade  between  countries 
will  be  that  based  oj^ialterable  climatic  or  physicaLadvantages; 
such  trade,  for  inst^rceTas  arises  between  tropical  and  temperate 
regions  and  between  temperate  regions  having  markedly  different 
natural  resources. 

This  consummation  will  not  be  reached  for  an  indefinite  period; 
nay,  probably  it  will  never  be  reached.  Certainly  it  is  beyond 
the  range  of  possibility  in  any  future  which  we  can  now  foresee. 
But  some  approach  to  it  is  likely  to  come  in  the  relations  between 
the  more  advanced  countries.  There  is  a  tendency  toward 
equalization  in  their  use  of  machinery,  and  so  in  their  general 
industrial  conditions.  For  the  United  States  especially,  the 
twentieth  century  will  be  different  from  the  nineteenth, 
period  of  free  land  has  been  virtually  passed.  That  great  basis  of 
high  material  prosperity  and  of  high  general  wages  no  longer  exists 
as  broadly  and  strongly  as  it  did  during  the  first  century  of  our 
national  life.  The  continued  maintenance  of  a  prosperity  greater 
than  that  of  England  and  Germany  and  France  must  rest  on  other 
causes.  Now  that  fresh  land  can  no  longer  be  resorted  to  by  the 
expanding  population,  a  higher  effectiveness  of  labor  must  depend 
almost  exclusively  on  better  implements  and  higher  skill,  - 
labor  better  led  and  better  applied.  It  may  be  reasonably  hoped 
that  the  United  States  will  long  remain  the  land  of  promise,  in  the 
van  of  material  progress;  but  the  degree  of  difference  may  be  less 
than  it  was.  This  lessening  difference  will  come  about,  probably, 
not  because  the  United  States  will  fall  back  but  because  other 
countries  will  gain  on  her.  Such  has  been  the  nature  of  the 
changed  relation  between  England  and  the  countries  of  the  Conti- 
nent during  the  last  generation;  and  such,  —  to  go  back  ^.cirlier, 
—  was  the  change  in  the  relative  positions  of  Holland  and  Eng- 
land in  the  course  of  the  seventeenth  and  eighteenth  cer  turies. 
England  no  longer  retains  the  unmistakable  leadership  whi  :h  she 
had  over  the  Continent  during  the  greater  part  of  the  nine  eenth 
century.     But  she  has  not  retrograded ;  the  countries  of  th   Con- 


THE  PRINCIPLE  OF  COMPARATIVE  ADVANTAGE      49 

tinent  have  progressed.  Such  is  likely  to  be  the  nature  of  the 
coming  race  between  the  United  States  and  other  advanced 
countries.  And  the  outcome  is  one  which  every  friend  of  hu- 
manity must  welcome.  It  means  diffused  prosperity,  economic 
and  social  progress.  ^^^^ 

For  an  indefinite  time,  hovvever,  differenHs  in  general  indus- 
trial effectivenessjwill  remain.  They  will  obviously  remain,  so 
far  as  they  rest  upon  natural  causes,  —  differences  in  soilrin 
mineral  wealth,  in  climate.  They  will  remain  also  in  many 
manufacturing  industries in  which  physical  causes  are  not  deci- 
sive. Some  countries,  —  the  United  States  among  them,  we  may 
hope  and  expect,  —  will  use  machinery  better,  will  apply  labor- 
saving  appliances  more  freely.  The  people  of  the  United  States 
will  direct  their  labor  with  greatest  advantage  to  those  industries 
in  which  their  abilities  tell  to  the  utmost.  The  development  of 
the  different  industries  will  unquestionably  continue  to  be 
affected  by  the  accidents  of  invention  and  of  progress,  by  domi- 
nant personalities  in  this  country  and  in  that,  by  the  historical 
development  of  aptitudes  and  tastes,  by  some  causes  of  variations 
in  industrial  leadership  that  seem  inscrutable.  But  a  general  if 
trend  is  likely  to  persist;  in  the  United  States  labor-saving  de- 
vices will  be  adopted  more  quickly  and  more  widely.  It  will 
be  shown  in  the  following  pages  how  this  tendency  has  appeared 
in  the  great  development  that  has  taken  place  since  the  civil  war, 
and  how  the  effects  of  tariff  legislation  have  been  themselves  in- 
fluenced by  the  general  tendency.  In  the  industries  where  ma- 
chinery can  be  used  to  most  effect,  this  country  will  continue  to 
have  a  comparative  advantage. 


•  «=- 


PART  II 
SUGAR 


CHAPTER  IV 

INTRODUCTORY  —  LOUISIANA 

The  duties  on  sugar  as  they  stood  for  the  half-century  after  the 
close  of  the  civil  war  illustrate  several  questions  of  principle. 
They  present  a  clear  case  of  the  continuance  of  imports  in  face  of 
duties;  and  yet  a  case  which,  as  regards  the  imports  of  the  later 
years  of  the  period,  needs  to  be  interpreted  with  caution.  During 
these  later  years,  moreover,  the  imports  came  chiefly  from  regions 
with  which  the  United  States  had  special  trade  relations;  either 
because  of  political  control,  as  with  Hawaii,  Porto  Rico,  and  the 
Philippines,  or  because  of  reciprocity  treaties,  as  with  Cuba.  The 
relaxations  of  duty  for  the  regions  thus  favored  caused  this 
schedule  of  the  tariff  to  stand  by  itself.  The  domestic  production 
of  sugar,  and  especially  of  beet  sugar,  increased  fast,  under  condi- 
tions which  can  be  understood  only  in  the  light  of  the  doctrine  of 
comparative  advantage.  The  refining  of  sugar,  again,  came  to 
be  during  the  half-century  a  great-scale  industry,  and  was  domi- 
nated by  one  of  the  earliest  of  the  trusts.  This  was  a  conspicuous 
case  in  which  the  protective  system  might  be  charged  with  having 
nurtured  or  at  least  strengthened  a  monopoly.  Lastly,  the 
revenue  from  sugar  was  large;  its  fiscal  yield  throughout  was 
important  for  the  federal  budget.  Varied  questions  hence  pre- 
sent themselves,  ramifying  into  phases  of  economic  inquiry  that 
seem  at  first  sight  to  stand  in  no  connection  with  the  sugar  duties. 
The  duty  on  sugar  during  the  greater  part  of  the  period  was  not 
far  from  two  cents  a  pound.  Under  the  tariff  acts  of  1870  and 
1883,  it  was  a  little  more  than  two  cents  (2.25  under  the  act  of 
1883).  Under  the  tariff  of  1890,  the  so-called  McKinley  bill, 
sugar  was  admitted  free.  But  a  bounty  was  then  given  on 
sugar  of  domestic  production,  at  the  rate  of  two  cents  a  pound; 
so  that  protection  was  retained  at  this  rate.  In  the  tariff  act  of 
1894,  the  "  Wilson  bill,"  a  new  system  was  adopted,  bringing  a 

53 


54  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

lowered  rate.  The  duty  was  made  ad  valorem  instead  of  specific; 
the  rate  was  made  forty  per  cent,  which,  at  the  low  prices  of  that 
period,  was  equivalent  to  little  more  than  one  cent  a  pound. 
Shortly  after,  however,  the  act  of  1897  (Dingley)  restored  the 
duty  very  nearly  to  the  level  which  had  prevailed  before  1890; 
it  was  fixed,  on  the  grades  chiefly  imported,  at  about  1  f  cents 
per  pound.  In  the  act  of  1909  (Payne- Aldrich)  this  figure  was 
not  changed. 

The  tariff  act  of  1913  reduced  the  duty  to  i\  cents  a  pound.1 
A  much  more  incisive  change  was  contemplated  in  the  act,  but 
never  came  to  pass.  In  1916  and  thereafter  sugar  was  to  have 
been  admitted  free,  the  interval  from  1913  to  191 6  being  allowed 
in  order  to  give  the  protected  industry  time  for  readjustment. 
But  when  19 16  came  the  expected  repeal  was  indefinitely  post- 
poned. The  duty  therefore  remained,  at  the  lower  rate  set  for 
what  had  been  expected  to  be  merely  a  transition  period. 

The  duties  above  stated  were  on  raw  sugar.  On  refined  sugar 
there  were  additional  duties,  so-called  "  differentials,"  designed 
to  give  protection  to  the  refiners.  The  effects  of  the  two  sets  of 
charges  —  on  raw  and  on  refined  —  are  quite  distinct,  though 
often  confounded  in  popular  discussion.  For  the  present,  atten- 
tion will  be  confined  to  the  duties  on  raw  sugar,  by  far  the  most 
important  in  quantitative  effect  and  presenting  also  the  problems 
of  most  interest  to  the  economist.2 

Until  about  the  year  1880,  the  effects  of  the  sugar  duty  were  of 
the  simplest  sort.  The  imports  were  large,  the  domestic  pro- 
duction comparatively  small.  The  imported  supply  was  from 
eighty  to  ninety  per  cent  of  the  total.  Hence  the  duty  in  the 
main  was  not  protective.     It  was  chiefly  a  revenue  duty:  by  far 

1  This  duty  was  subject  to  a  reduction  of  20  %  on  sugar  from  Cuba,  whence 
come  almost  all  the  imports.  The  duty  on  Cuban  sugar  was  one  cent.  On  the 
Cuban  rebate  and  its  effect  see  below,  pp.  75-79. 

2  For  the  details  of  the  sugar  duties,  and  the  causes  which  led  to  the  changes 
in  the  several  tariff  acts,  I  refer  the  reader  to  my  Tariff  History  of  the  United 
States.  The  duties  were  usually  arranged  by  gradations  according  to  the  quality 
(saccharine  content)  of  the  raw  sugar,  and  sundry  complicated  questions  arose 
because  of  the  tariff  gradations.  These,  however,  though  troublesome  for  the 
customs  administrators,  have  but  little  bearing  on  the  protective  controversy. 


INTA9&UCT9RY  —  LOUISIANA  5  5 

the  greater  part  of  what  the  consumers  paid  in  the  way  of  en- 
hanced price,  or  tax,  went  as  revenue  to  the  federal  Treasury. 

The  domestic  production  was  confined  to  Louisiana.  There 
it  had  suffered  during  the  civil  war,  and  at  the  period  with  which 
we  begin  was  less  important,  both  absolutely  and  in  proportion 
to  the  imports,  than  it  had  been  before  i860.  During  the 
decade  1870-80  the  Louisiana  output,  fluctuating  with  the  sea- 
sons, ranged  from  100  to  200  million  pounds  a  year.  The  im- 
ports ranged  from  1000  to  2000  million  pounds.  Not  only  was 
the  Louisiana  supply  thus  small  in  comparison  with  the  total,  but 
it  was  produced  under  conditions  not  dissimilar  from  those  in  the 
competing  foreign  countries.  The  question  of  the  effects  of  pro- 
tection was  presented  without  complexity.  The  Louisiana 
sugar,  like  that  imported,  was  made  from  cane,  and  by  substan- 
tially the  same  methods  and  with  labor  of  very  much  the  same 
character.  The  climate,  however,  is  less  favorable  for  sugar  cane 
in  Louisiana  than  in  Cuba,  Java,  and  the  other  regions  whence 
cane  sugar  is  imported.  The  duty  was  "  needed  "  for  protection, 
because  the  Louisiana  sugar  was  produced  under  physical  condi- 
tions less  favorable.  The  effect  of  the  duty,  considered  from  any 
but  the  mercantilist  point  of  view,  was  obviously  disadvanta- 
geous. But  the  national  loss,  assessed  according  to  the  orthodox 
reasoning,  was  not  quantitatively  considerable,  since  the  supply 
came  preponderantly  by  importation. 

The  later  course  of  development  in  Louisiana  brought  some 
considerable  changes.  The  Louisiana  supply  increased  very 
much  beyond  what  it  was  in  1870-80;  yet  it  remained  about  the 
same  proportion  of  the  total,  —  not  far  from  10  per  cent  of  the 
country's  consumption.  The  increase  was  irregular,  fluctuating 
with  the  Louisiana  crops,  which  are  peculiarly  subject  to  variation 
from  year  to  year  because  of  the  possibility  of  frost,  —  the  serious 
natural  drawback  in  this  region.  After  1890  there  was  a  sub- 
stantial gain,  no  doubt  due  in  part  to  the  effect  on  men's  imagina- 
tion of  the  bounty  given  by  the  McKinley  tariff  act.  It  is  true 
that  the  bounty  was  intended  to  do  no  more,  and  in  fact  did  no 
more,  than  make  up  for  the  abolition  of  the  duty.  But  a  bounty 
seems  to  make  a  greater  impression  than  a  duty,  —  not  only  on 


56  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

the  general  public,  but  also,  strange  as  it  may  seem,  on  the 
producers  whose  affairs  are  directly  concerned.1 

Possibly  there  was  in  some  degree  a  really  greater  benefit  to  the 
Louisiana  sugar  planters  from  the  bounty  than  there  had  been 
from  the  previous  duty;  since  some  small  fraction  of  the  latter 
had  probably  been  intercepted  by  the  refiners.2  At  all  events 
the  Louisiana  sugar  output  grew  very  rapidly  during  the  bounty 
period  (1891-95),  and  reached,  toward  its  close,  dimensions  which 
at  no  later  date  were  much  exceeded. 

After  the  bounty  episode  there  were  important  changes  in  the 
internal  organization  of  the  industry  in  Louisiana.  Sugar  prices 
the  world  over  were  low  during  the  closing  years  of  the  nineteenth 
century  and  the  opening  years  of  the  twentieth,  chiefly  because 
of  the  pressure  on  the  market  of  the  bounty-fed  sugar  from 
Continental  Europe.  The  Louisiana  industry  necessarily  felt  the 
pressure,  and  thereby  was  forced,  as  is  so  often  the  case  when 
profits  are  threatened  by  adverse  conditions,  to  put  its  best  foot 
foremost.  Plantation  methods  and  sugar-house  methods  were 
improved.  Many  plantations  passed  out  of  the  hands  of  the  old 
easy-going  families,  and  were  managed  more  efficiently  by  new 
men.  The  previous  system  of  having  a  sugar-mill  on  every 
plantation  was  superseded  by  one  of  independent  central  sugar- 
mills,  each  grinding  the  cane  and  extracting  the  sugar  for  a 
dozen  plantations,  and  each  equipped  with  expensive  and  well- 
planned  machinery.3  A  necessary  part  of  the  new  method  was  a 
network  of  fight  railways  for  carrying  the  cane  to  the  grinding 
centers.  The  transition  to  this  more  capitalistic  system,  it  may 
be  noted,  was  not  peculiar  to  Louisiana,  nor  first  undertaken 
there.  It  took  place  in  the  other  cane-sugar  regions  also,  at 
about  the  same  time  and  because  of  the  same  pressure  from  low 
prices  of  sugar.     At  all  events,  with  the  improvements,  sugar 

1  Compare  the  similar  case  with  beet-sugar  production;  below,  p.  80. 

J  For  the  consideration  of  this  aspect  of  the  situation,  see  below,  p.  1 10. 

3  See  the  testimony  before  the  Senate  Committee  of  191 1  on  Sugar  Refining 
(Hardwick  Committee),  pp.  1760-1797.  The  new  system  seems  to  have  originated 
in  Java  among  the  Dutch,  then  to  have  been  copied  in  Cuba,  and  adopted  last  in 
Louisiana.  See  the  testimony  of  a  well-informed  observer,  Mr.  Rionda,  in  the 
suit  of  U.  S.  Govt.  v.  Am.  Sug.  Ref.  Co.,  Transcript  of  Record,  p.  7914. 


INTRODUCTORY— LOUISIANA  57 

making  in  Louisiana  held  its  own  and  even  showed  some  increase 
during  the  years  1900-10. 

The  changes  in  duty  provided  for  in  the  tariff  act  of  19 13  were 
strenuously  resisted  by  the  Louisiana  planters  and  their  repre- 
sentatives in  Congress.  The  complete  repeal  of  the  duty  then 
contemplated  was  alleged  to  threaten  ruin  to  their  industry ;  and 
it  was  these  protests  which  were  most  effective  in  bringing  about 
in  1916  the  retention  for  an  indefinite  period  of  the  lowered  rate 
which  had  been  expected  to  endure  for  the  transition  period  only. 
The  indications  are  that  in  fact  free  sugar  would  have  caused 
most  of  the  Louisiana  planters,  perhaps  all  of  them,  to  give  up 
sugar  and  turn  to  something  else.  Their  industry  seems  to  be,  in 
the  main,  unable  to  hold  its  own  without  protection;  it  cannot 
put  sugar  on  the  market  as  cheaply  as  competitors  in  Cuba  and 
Java,  or  as  those  in  the  better-situated  beet  regions.  The  case  is 
the  comparatively  simple  one  of  a  domestic  industry  dependent 
on  an  import  duty.  More  complex  are  the  consequences  of  the 
sugar  duty  in  other  regions,  to  which  attention  is  given  in  the 
chapters  which  follow.1 

1  Since  the  first  edition  of  this  book  appeared  (1015)  additional  information  on 
the  cane  sugar  industry  in  Louisiana  and  elsewhere  has  been  supplied  in  a  report  on 
The  Cane  Sugar  Industry  published  by  the  Bureau  of  Foreign  and  Domestic  Com- 
merce of  the  Department  of  Commerce.  The  report,  issued  in  191 7,  gives  data  for 
an  earlier  period,  the  fiscal  year  1913-14.  For  that  year,  it  covers  not  only  Louisiana 
but  most  of  the  other  cane-growing  regions  described  in  this  book,  —  Cuba,  Hawaii, 
Porto  Rico,  —  and  gives  figures  in  detail  on  cost  of  production  in  each  of  them.  As 
regards  Louisiana,  costs,  while  they  vary  surprisingly  for  the  several  plantations 
and  mills,  are  in  general  markedly  higher  than  in  any  other  region;  so  much  higher 
as  to  indicate  that  little  sugar  would  continue  to  be  produced  in  the  state  under  free 
trade.     Cf.  the  footnote  to  p.  79,  below. 


CHAPTER  V 

HAWAII 

The  first  important  modification  of  the  comparatively  simple 
situation  which  continued  so  long  as  Louisiana  alone  was  favored 
against  the  importing  countries  came  from  the  reciprocity  treaty 
with  Hawaii  in  1876.  The  islands  of  the  Hawaiian  group  went 
through  several  industrial  stages  after  their  first  contact  with 
white  men  during  Cook's  memorable  voyage  (1778).  At  the 
outset  sandal  wood  was  the  dominant  article  of  commerce;  next 
they  became  a  center  for  the  whaling  trade  of  the  Pacific;  last 
came  the  stage  of  sugar  planting.  The  treaty  of  1876  provided 
for  the  reciprocal  free  admission  into  the  United  States  and  the 
Hawaiian  islands  of  certain  commodities,  among  which  sugar  was 
the  only  considerable  article  of  commerce.  The  free  admission 
of  sugar  into  the  United  States  proved  to  be  of  signal  importance. 
Not  only  did  it  transform  the  internal  conditions  of  the  islands;  it 
altered  their  relations  with  the  rest  of  the  world,  and  eventually 
led  to  their  incorporation  into  the  United  States.1 

At  the  time  when  the  reciprocity  arrangement  was  concluded, 
there  was  no  expectation  of  any  such  considerable  economic  conse- 
quences. Political  motives,  in  the  main,  led  to  the  treaty.  It 
was  feared  that  Great  Britain  would  acquire  the  islands;  much 
was  said  of  their  desirability  as  a  coaling  station.  The  treaty 
seems  to  have  been  due  chiefly  to  the  persistent  prepossession  for 

1  The  treaty,  concluded  in  1875,  went  into  effect  in  1876.  It  was  to  remain  in 
force  for  seven  years,  then  to  be  terminable  on  a  year's  notice.  In  1884  a  convention 
renewed  the  treaty  for  seven  years  from  the  date  of  ratification;  thereafter  it  was  to 
be  again  terminable  on  a  year's  notice.  Ratification  did  not  take  place  until  1887; 
seven  years  after  that  date,  i.  e.,  in  1894,  the  arrangement  once  more  became  termi- 
nable. 

It  was  provided  in  1884  that  the  United  States  might  maintain  a  coaling  and 
repair  station  at  Pearl  Harbor,  a  magnificent  bay  not  far  from  Honolulu;  and 
Hawaii  engaged  to  give  no  other  power  a  lien  or  lease  on  any  of  its  harbors. 
Nothing  was  done  by  the  United  States  at  Pearl  Harbor  during  the  treaty  period, 
but  in  later  years  (1907-13)  much  work  was  done  for  improving  the  channel,  con- 
structing a  huge  dry  dock  and  erecting  fortifications. 

58 


HAWAII  59 

owning  or  controlling  foreign  lands,  —  as  if  a  nation  by  that  one 
stroke  secured  additional  riches,  —  and  to  the  general  jingo- 
mercantilist  fear  of  being  got  the  better  of  by  another  country. 
Something  was  due  to  the  fact  that  American  missionaries  were 
established  in  the  islands,  and  had  great  and  growing  influence 
among  the  natives.  Though  it  was  pointed  out,  in  the  debates, 
that  sugar  planting,  already  carried  on  in  the  islands,  would 
become  more  profitable  under  the  treaty,  no  great  extension  of 
the  industry  was  anticipated.  ' 

The  effect,  however,  was  immediate;  and  it  has  proved  to  be 
cumulative.  Before  the  treaty  the  imports  of  sugar"  had  never 
risen  to  20  million  pounds.  They  touched  that  figure  in  the  very 
first  year  (1876).  Thereafter  the  rate  of  increase  was  extraordi- 
nary, each  year  showing  a  sharp  advance  above  its  predecessor. 
By  1882,  the  imports  exceeded  100  million  pounds;  by  1887,  200 
millions.  There  was  some  relaxation  during  the  period  of  the 
McKinley  tariff,  1890-94,  for  reasons  presently  to  be  explained. 
After  1895  the  upward  movement  was  resumed.  The  Hawaiian 
supply  so  grew  that  it  finally  exceeded  that  from  Louisiana,  large 
as  the  latter  had  become.  By  1908  the  quantity  of  sugar  from 
the  islands  was  more  than  1000  million  pounds;  and  it  remained 
above  that  figure  thereafter.  From  an  insignificant  item,  it  be- 
came an  important  one;  in  recent  years  (1908-13)  about  one- 
seventh  of  the  total  supply  has  come  from  this  source. 

Who  got  the  benefit  of  this  remission  of  duty  ?  The  United 
States  Treasury  lost  very  considerable  amounts;  so  much  sugar 
came  in  free  that  otherwise  would  have  been  taxed.  The  con- 
sumers in  the  United  States  did  not  get  the  benefit.  The  price 
of  sugar  did  not  fall;  nor  could  it  be  expected  to  fall.  By  far  the 
larger  portion  of  the  sugar  consumed  continued  to  be  imported 
from  non-favored  regions  and  remained  subject  to  duty.  The 
Hawaiian  planters  did  not  sell  their  sugar  at  a  price  below  that 
current  in  the  United  States,  —  a  price  necessarily  higher  by  the 
full  amount  of  the  duty  of  two  cents  a  pound.  Clearly  it  was 
the  planters  whom  one  would  expect  to  be  the  beneficiaries  from 
the  remission.  And  so  it  proved.  The  Hawaiian  sugar  naturally 
found  its  way  to  the  Pacific  coast,  and  there  was  sold  at  the  full 


60  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

American  duty-paid  price.1  It  soon  supplied  the  whole  of  Cali- 
fornia and  the  other  coast  states,  and,  as  the  imports  from  the 
islands  grew,  made  its  way  eastward  toward  the  Missouri  river. 
It  was  a  main  factor  in  the  contest  which  went  on  for  a.  while  be- 
tween the  eastern  refiners  and  those  of  the  Pacific  coast,  —  an 
episode  of  which  more  will  be  said  in  due  course.2  But  in  all  this 
the  purchasers  of  the  Hawaiian  sugar  found  no  advantage.  They 
paid  at  least  as  much  for  their  sugar  as  the  people  of  New 
York  or  Massachusetts,  who  consumed  dutiable  sugar.  The  effect 
of  the  reciprocity  treaty  was  to  include  the  Hawaiian  planters 
within  the  pale  of  the  protective  system.  They  were  put  in  the 
same  position  as  the  planters  of  Louisiana. '  Or,  to  state  the  out- 
come in  other  terms,  the  United  States  gave  a  bounty  of  two 
cents  a  pound  to  the  sugar  growers  of  Hawaii. 

This  is  the  normal  effect  of  a  remission  of  tax  on  part  of  the 
supply.  So  long  as  some  fraction  of  the  supply  continues  to  be 
steadily  taxed,  —  so  long  as  dutiable  imports  persist,  —  the  whole 
is  raised  in  price  by  the  full  amount  of  the  tax  or  duty.  The  pro- 
ducer, domestic  or  foreign  as  the  case  may  be,  gets  the  benefit  of 
the  remission,  not  the  consumer.  The  effect  is  the  same  in  kind, 
only  less  in  degree,  if  there  is  a  partial  remission,  —  if  part  of  the 
supply  is  subjected,  say,  to  only  half  tax  or  half  duty.  If  a  por- 
tion of  the  supply  continues  to  pay  the  full  tax  regularly,  the 
half  which  is  remitted  follows  the  same  course  as  would  the  whole : 
it  goes  into  the  pockets  of  the  producers. 

Hence  the  extraordinary  growth  of  sugar  planting  in  Hawaii, 
and  the  extraordinary  increase  of  the  imports  into  the  United 
States.  The  growth  in  the  islands,  however,  took  place  under 
circumstances  in  many  respects  peculiar,  and  with  unexpected 
political  and  social  consequences.  At  the  risk  of  some  digression 
from  our  main  topic,  attention  may  be  given  to  some  of  these 
consequences. 

The  planters  who  reaped  the  high  profits  were  chiefly  Ameri- 
cans, or  of  American  extraction.     Some  were  descendants  of  the 

1  Subject  to  a  slight  reduction,  however,  which  enured  to  the  advantage  of  the 
sugar  refiners;  see  below,  p.  108. 

2  See  below,  pp.  104, 105. 


HAWAII  '  6 1 

American  missionaries  who  during  the  preceding  half-century 
had  had  such  remarkable  success  in  converting  and  guiding  the 
natives.  Some  were  new  arrivals,  who  hastened  to  exploit  the 
rich  opportunity.  Among  the  latter  was  the  astute  Spreckels, 
who  combined  the  profits  of  Hawaiian  planting  with  those  of  re- 
fining in  California,  built  up  a  great  fortune,  and  became  an  im- 
portant figure  in  the  islands.  But  the  planters  of  the  "  old  ': 
American  families  remained  the  dominant  element.  Sugar 
growing,  under  any  conditions  a  large-scale  industry,  was  the 
more  readily  concentrated  in  comparatively  few  hands  through 
their  control,  by  lease  from  the  government  or  by  ownership,  of 
the  best  available  land.  The  great  planters  became  an  oligarchy, 
succeeding  the  missionaries  as  the  real  power  behind  the  Hawaiian 
throne.  The  swarthy  monarchs,  King  Kalakaua  and  his  sister 
and  successor  Queen  Liliuokalani,  were  little  disturbed  in  their 
sham  royalty  so  long  as  they  confined  themselves  to  dissipation 
and  petty  plunder.  But  both  in  turn  were  deposed  when  they 
undertook  really  to  rule.  There  never  was  a  more  pasteboard 
throne  than  that  of  the  latter-day  Hawaiian  kings  and  queens. 

The  enviable  situation  of  the  planters,  —  increasing  output  of 
sugar,  high  dividends  on  plantation  shares,  and  high  prices  of 
sugar  land,  —  received  a  rude  shock  in  1890.  In  that  year  the 
McKinley  tariff  act  admitted  sugar  into  the  United  States  free  of 
duty.  Consistently  with  the  protective  principle,  the  Louisiana 
sugar  growers  were  placated  by  a  direct  bounty  of  two  cents  a 
pound.  But  the  Hawaiian  planters,  not  yet  within  the  American 
pale,  received  no  bounty.  They  had  now  to  accept  for  their 
sugar  the  price  of  the  open  market,  like  the  planters  of  Cuba  and 
Java  and  Brazil.  The  price  of  sugar  went  down  sharply  in  the 
islands;  it  is  said  to  have  fallen  in  a  single  day  after  the  passage 
of  the  tariff  act  from  $100  to  $60  a  ton.1  Hence  great  depression 
and  much  soreness  of  heart.  The  hard  times  that  ensued  meant, 
to  be  sure,  not  that  all  profits  had  disappeared,  but  in  the  main 
that  the  extravagances  of  the  past  had  to  be  given  up.  As  the 
heavily-watered  sugar  company  stocks  shrank,  planters'  expen- 
ditures could  no  longer  be  on  a  recklessly  generous  scale.     More- 

1  C.  Whitney,  The  Hawaiian  Islands,  p.  194. 


62  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

over,  the  pressure  of  need  caused  the  methods  of  growing  cane 
and  extracting  sugar  to  be  greatly  improved,  —  the  same  result 
that  ensued  a  few  years  later  under  similar  conditions  in  Louis- 
iana. The  hard  times  of  1891-94  proved  a  blessing  in  disguise; 
they  led  to  improvements  which  were  extraordinarily  profitable 
under  the  favorable  conditions  which  soon  were  restored. 

The  uneasiness  and  discontent  bred  by  the  pressure  of  1891-94 
led  to  the  Hawaiian  revolution  of  1892,  and  to  the  treaty  which 
the  administration  of  President  Harrison  made  for  the  annexation 
of  the  islands  to  the  United  States.  It  would  not  be  just  to  say 
that  sugar  and  reciprocity,  and  a  desire  to  get  once  more  under 
profitable  cover,  were  the  sole  motives  for  the  upsetting  of  the 
frail  monarchy.  The  queen  Liliuokalani  and  her  predecessor 
Kalakaua  had  not  been  creditable  specimens  of  royalty,  and 
doubtless  were  a  good  riddance.  Among  the  planters  themselves 
there  was  some  division  of  opinion  on  the  expediency  of  annex- 
ation. None  the  less  it  is  clear  that  the  root  of  the  movement  was 
in  the  sugar  situation,  —  in  the  wish  to  get  back  somehow  into 
the  golden  relations  with  the  American  market.  This  was 
certainly  the  case  when  annexation  was  finally  accomplished.  It 
will  be  recalled  that  the  Cleveland  administration,  on  coming  into 
power  in  March,  1893,  withdrew  from  the  Senate  the  annexation 
treaty  concluded  by  its  predecessor,  and  caused  the  collapse  for  the 
time  being  of  the  whole  movement.  But  the  Hawaiian  monarchy 
was  gone  for  good,  and  the  Hawaiian  Republic  (with  a  carefully 
guarded  suffrage!)  took  its  place.  Very  soon  after,  in  1894,  the 
United  States  again  imposed,  in  the  Wilson  Tariff  Act,  a  duty  on 
sugar;  not  quite  so  high  a  duty  as  that  before  1890,  but  high 
enough,  —  Hawaiian  sugar  being  throughout  admitted  free,  —  to 
restore  a  handsome  bounty  for  the  island  planters.  Good  times 
returned  in  the  islands,  and  were  rendered  more  secure  by  their 
final  annexation  in  1898.  As  soon  as  President  Cleveland  went 
out,  the  McKinley  administration  emphasized  its  adoption  of 
directly  opposite  policies  by  renewing  the  negotiations  for  annexa- 
tion. A  treaty  for  annexation  was  concluded  as  early  as  June, 
1897;  but  ratification  by  the  Senate  did  not  come  until  1898, 
when  the  Spanish  War  and  the  Philippine  conquest  brought  an 


HAWAII  63 

added  pressure.  The  favored  position  of  Hawaiian  sugar  rested 
thereafter  not  on  the  basis  of  a  revocable  treaty  (the  treaty  had 
become,  after  1894,  terminable  at  twelve  months'  notice),  but  on 
the  solid  foundation  of  a  complete  incorporation  in  the  American 
dominions.  Sugar  growing,  which  had  barely  held  its  own  from 
1890  to  1894,  now  resumed  its  upward  march.  New  plantations 
were  opened,  old  ones  enlarged  their  output,  more  and  more  sugar 
was  poured  into  the  United  States,  and  the  islands  again  boomed. 
The  increase  of  the  Hawaiian  sugar  crop  during  the  later  years 
took  place  in  a  way  that  serves  to  illustrate  still  other  economic 
principles.  The  tendency  to  diminishing  returns  in  agriculture 
showed  itself  as  the  sugar  growing  resources  of  the  island  were 
pushed  further.  The  best  plantation  lands  had  now  been  in  use 
for  many  years.  As  more  sugar  was  got  from  the  soil  it  became 
necessary, —  even  for  the  maintenance  of  output  at  the  existing 
rate, —  to  resort  to  high  cultivation.  The  Hawaiian  plantations 
hence  became  large  importers  and  users  of  fertilizers.  Therein 
they  were  in  contrast  with  Cuba,  where  sugar  land  was  abundant, 
and  where,  as  one  patch  showed  signs  of  exhaustion,  the  planter 
simply  moved  on  to  another  virgin  plot.  Not  only  was  there  this 
pressure  on  the  good  sites  in  Hawaii :  there  was  the  natural  ten- 
dency to  descend  in  the  scale  of  cultivation,  and  to  use  poorer  and 
poorer  sites.  Sugar  cane  depends  on  abundant  precipitation. 
This  is  supplied  on  the  windward  slopes  of  the  islands  by  the 
moisture  laden  winds  from  the  Pacific.  But  on  the  leeward  slopes, 
and  on  inland  areas  shut  off  from  the  ocean  by  mountain  barriers, 
the  rainfall  is  insufficient.  Here  great  irrigation  works  were 
set  up,  largely  by  pumping  from  artesian  wells,  and  sometimes 
with  an  admirable  technical  equipment.1  In  other  words,  under 
the  bait  of  the  artificially  high  price  of  sugar,  capital  and  labor 
were  turned  to  the  utilization  of  natural  resources  not  in  them- 
selves of  the  best.     It  is  part  of  the  same  pressure  on  the  land  that 

1  On  one  great  plantation,  separated  by  mountains  6,000  feet  high  from  the 
water-soaked  side  of  the  island  of  Kauai,  electric  power  was  developed  on  the 
mountain  streams  on  that  side,  transmitted  over  the  mountains  to  the  drier  area, 
and  there  utilized  in  pumping  water  for  irrigation  from  artesian  wells.  See  the 
American  Sugar  Industry  and  Beet-Sugar  Gazette,  April  5,  1906.  Cf.  Whitney,  The 
Hawaiian  Islands,  p.  194;  Bulletin  Bureau  of  Labor,  1903,  pp.  725,  726,  733. 


64  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

sugar  cultivation  in  Hawaii  was  intensive;  the  yield  per  acre  is  said 
to  have  been  higher  than  in  any  other  cane  growing  country; 1 
fertilizers,  as  has  just  been  noted,  were  imported  in  large  quan- 
tity. As  is  often  the  case  in  descriptions  and  discussions  of 
intensive  cultivation,  these  refined  methods  and  high  acreage 
yields  were  spoken  of  as  meritorious,  proving  that  the  industry 
was  doing  well.  In  fact  they  proved  that  the  land  was  being 
forced,  that  the  tendency  to  diminishing  returns  had  set  in, 
and  that  strenuous  exertions  were  being  made  to  overcome  the 
difficulties. 

Hence  there  must  be  some  qualification  to  the  statement  or 
implication  in  the  preceding  paragraphs,  that  the  bounty  or  pro- 
tection on  Hawaiian  sugar  enured  to  the  special  profit  of  the  sugar 
planters.  It  did,  so  far  as  they  produced  the  sugar  on  the  more 
favorable  sites  or  under  the  more  favorable  conditions.  So  far  as 
they  had  to  turn  to  poorer  sources  of  supply,  or  pushed  their 
plantations  to  extra  yield  by  high  cultivation,  they  were  led  to 
make  that  disadvantageous  application  of  labor  and  capital  which 
is  the  more  ordinary  consequence  of  a  protective  duty.  The 
higher  price  of  sugar  enabled  the  planters  to  carry  on  some  sugar 
growing  which  they  could  not  have  carried  on  without  the  bonus. 
It  is  impossible  to  determine  how  large  a  part  of  the  sugar  plant- 
ing of  the  islands  was  in  this  sense  wasteful.  The  circumstance 
that  during  the  years  of  free  sugar  (1890-94)  their  output,  though 
it  failed  to  increase,  did  not  shrink  (it  remained  not  far  from 
300  million  pounds),  would  indicate  that  up  to  this  amount  culti- 
vation had  not  been  pushed  to  the  point  of  slackening  returns. 
On  the  other  hand,  the  output,  after  a  steady  growth  from  1894 
to  1908,  remained  after  the  latter  year  virtually  stationary  (at 
about  1,000  million  pounds);   apparently  showing  that  with  this 

1  Whitney,  p.  198.  Cf.  R.  S.  Baker,  in  the  American  Magazine,  Nov.,  191 1: 
"  I  have  seen  great  fields  plowed  nearly  three  feet  deep  with  huge  steam  plows;  and 
the  stories  of  the  use  of  fertilizers  are  almost  unbelievable  to  a  person  accustomed  to 
the  ordinary  farming  methods  of  the  middle  West."  The  statistics  of  Hawaiian 
trade  given  in  the  U.  S.  Reports  on  Commerce  and  Navigation  show  that  the  islands 
imported  annually  (e.  g.,  in  1910  and  191 1)  a  million  dollars'  worth  of  fertilizers, 
chiefly  phosphate. 


HAWAII  65 

amount  the  margin  of  profitableness,  even  though  it  may  not 
have  been  quite  reached,  was  being  approached. 

One  further  illustration  of  general  economic  principles  may- 
be noted.  The  bonus  has  caused  in  the  islands  a  rearrange- 
ment of  industry  which  has  conformed  to  the  principle  of  com- 
parative advantage.  It  made  sugar  production  a  peculiarly 
advantageous  industry,  —  advantageous,  that  is,  from  the  profit- 
making  point  of  view.  Sundry  commodities  were  imported  into 
the  islands  for  which  they  seem  to  be  well  adapted  and  which  had 
formerly  been  made  within  their  own  limits.  Though  possessed 
of  a  temperate  climate,  and  apparently  capable  of  producing  at 
moderate  cost  wheat,  Indian  corn,  meat,  they  imported  these 
staples.1  Sugar  had  been  made  the  more  profitable  industry,  and 
to  this  all  the  energies  of  the  inhabitants  were  turned.  Possibly 
the  same  result  would  have  ensued  in  any  case;  sugar  may  have 
a  comparative  advantage  even  without  a  bonus;  but  the  devotion 
of  practically  all  the  land  and  labor  and  capital  of  the  islands  to 
this  one  industry  was  settled  once  for  all  by  the  special  advantage 
which  was  given  it  by  favored  treatment  on  the  part  of  the  United 
States. 

Still  another  aspect  of  the  Hawaiian  experience  is  significant: 
its  labor  problem.  The  light-hearted  easy-going  native  —  the 
Kanaka  —  proved  unwilling  to  do  the  unremitting  hard  labor  of 
the  cane  fields  and  sugar  mills.     He  had  proved  an  excellent  sea- 

1  "  Hawaii,  with  a  climate  unexcelled,  and  a  soil  capable  of  producing  the  ma- 
jority of  both  temperate  and  tropical  products,  nevertheless  imports  the  bulk  of  its 
food.  Although  in  the  fifties,  and  a  bit  later,  Hawaii  supplied  the  Pacific  coast  with 
wheat  and  potatoes,  it  now  spends  abroad  over  one  million  dollars  annually  for  food 
deficits  of  man  and  beast,  the  greater  portion  of  which  could  be  and  should  be  raised 
on  the  islands.  Of  this  amount  nearly  $300,000  goes  for  hay  and  grain,  and  $80,000 
for  dried  fish,  although  the  waters  surrounding  the  islands  teem  with  fish!  .  .  . 
Hawaii  could  greatly  increase  both  the  quality  and  quantity  of  its  cattle-raising  by 
pursuing  the  industry  more  intelligently  and  less  extravagantly.  Corn  is  necessary 
to  put  the  stock  on  the  market  in  prime  condition;  but  although  there  is  scarcely 
a  cattle  range  where  corn  would  not  flourish  at  a  very  small  outlay  of  either  time  or 
money,  the  cattle  men  get  their  corn  from  California  and  pay  two  cents  a  pound  for 
it!  "     Whitney,  Hawaiian  America,  pp.  159,  173. 

In  191 1  the  islands  imported  from  the  United  States, 

Meat  and  Dairy  Products $897,000 

Breadstuffs  (including  flour) 1,950,000 

Fish  (chiefly  canned) 390,000 


66  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

man,  and  could  be  induced  to  serve  as  teamster  or  cowboy.  But 
for  plantation  work  others  had  to  be  sought.  Indeed,  the 
Hawaiian  race  was  disappearing;  it  could  not  resist  the  vices  and 
diseases  of  civilization.  The  natives  had  been  declining  in 
numbers  from  their  very  first  contact  with  the  white  race,  and 
before  long  became  a  minor  part  of  the  population.  Other  labor 
had  to  be  resorted  to,  more  hardy  in  the  fields  and  more  willing  to 
labor  long  and  steadily.  The  Chinese  were  brought  into  the 
islands  by  the  thousand.  They  came  under  a  "  penal  labor  con- 
tract," devised  in  the  early  days  (the  act  authorizing  it  was  passed 
in  1850) :  a  contract  under  which  the  laborer  bound  himself  for 
service  at  fixed  wages  for  a  period  of  years,  and  could  be  appre- 
hended and  delivered  to  his  employer  if  he  ran  away.1  As  an 
agent  of  the  United  States  Department  of  Labor  remarked,  this 
arrangement  had  "  all  the  advantages  of  slavery  without  its  dis- 
advantages." 2  The  Chinese  coolies  were  a  semi-servile  labor 
force,  absolutely  at  the  planter's  disposal  for  the  stipulated  term 
(usually  five  years),  while  yet  he  suffered  no  loss  if  they  should 
die.  That  the  coolies  were  not  an  entirely  wholesome  constituent 
in  the  population  was  obvious  enough  from  the  outset,  and  an 
attempt  was  made  (in  1878-86)  to  secure  Portuguese  laborers 
from  the  Azores.  A  few  thousand  Portuguese  were  brought  in 
under  labor  contracts  and  placed  on  the  plantations.  But  though 
tough  and  hard-working,  they  proved,  like  the  Kanakas,  unwill- 
ing to  remain  permanently  on  the  sugar  fields.  As  soon  as  the 
stipulated  term  of  service  expired,  they  took  a  bit  of  land  for 
their  own  cultivation  or  became  artisans.3     The  planters  found 

1  See  Professor  Katherine  Coman's  History  of  Contract  Labor  in  the  Hawaiian 
Islands,  Publ.  Amer.  Econ.  Assoc,  3d  series,  vol.  iv  (1903). 

2  Report  on  Hawaii,  Bulletin  Department  of  Labor,  no.  66  (Sept.,  1906). 

3  Some  10,000  Portuguese  in  all  were  brought  in  under  contract,  most  of 
them  between  1880  and  1885.  "  The  Portuguese  were  brought  in  for  the  purpose 
of  supplying  plantation  laborers,  but  most  of  them  are  engaged  in  skilled  or  semi- 
skilled occupations  and  even  when  the  demand  for  field  labor  was  most  pressing,  the 
second  generation  of  Portuguese  were  leaving  the  islands.  .  .  .  While  many  Por- 
tuguese remain  on  the  plantations  till  old  age,  they  do  not  care  to  remain  field  labo- 
rers all  their  life."     Report  on  Hawaii,  Ibid.,  pp.  423,  429. 

The  Portuguese  have  tended  in  more  recent  years  (1904-12)  to  drift  to  California; 
see  note  by  V.  S.  Clark,  in  Publ.  Amer.  Statist.  Assoc,  June,  1913,  p.  466. 


HAWAII  67 

it  necessary  to  fall  back  on  Asiatic  labor,  partly  Chinese,  partly 
Japanese. 

After  the  annexation  of  the  islands  to  the  United  States,  in 
1898,  the  labor  problem  entered  on  still  a  new  phase.  The  pro- 
hibition of  the  immigration  of  Chinese  laborers  applied  to  Hawaii; 
moreover,  the  contract  labor  system  was  made  illegal  by  the  act 
of  Congress  providing  for  the  government  of  the  new  territory. 
The  planters  were  compelled  to  turn  to  the  Japanese.  These 
entered  thereafter  by  the  thousand,  and  became  the  largest  single 
element  in  the  population  of  the  islands.  They  were  not  so  docile 
as  the  Chinese,  especially  in  view  of  their  being  "free,"  —  no 
longer  contract  laborers.  They  were  able  to  ask  for  higher 
wages,  and  even  to  strike.  They  "  made  trouble  "  in  various 
ways.  But  the  planters,  compactly  organized,  came  to  an 
agreement  for  uniformity  in  their  rates  of  wages; 1  they  would  not 
overbid  each  other;  and  the  Japanese  were  satisfied  with  a  mod- 
erate increase  of  pay.  There  was  and  is  a  constant  movement  to 
and  fro  between  Hawaii  and  Japan;  for  the  plantation  laborer 
remains  a  bird  of  passage,  as  he  always  has  been.  For  a  time 
there  was  a  movement  also  between  Hawaii  and  California.  The 
tension  between  the  United  States  and  Japan  concerning  the  im- 
migration of  Japanese  laborers  was  due  in  no  small  part  to  the 
fact  that  the  islands  became  a  stepping  stone  toward  the  land  of 
high  wages  and  real  freedom.  The  agreement  of  1908  by  which 
Japanese  immigration  to  the  United  States  proper  has  been  con- 
trolled by  Japan  itself  put  an  end  to  this  cause  of  friction;  but  in 
Hawaii  the  Japanese  remain,  and  constitute  the  bulk  of  the 
laborers  in  the  sugar  fields.2 

The  political  and  social  conditions  resulting  from  this  unex- 
pected industrial  development  are  obviously  not  consonant  with 
the  ideals  of  democracy.  A  great  mongrel  mass  of  sugar- 
plantation  laborers,  —  Chinese,  Japanese,  the  wasting  Hawaiians, 
a  very  few  Portuguese;  above  them  an  oligarchy  of  rich  planters, 

1  Coman,  p.  48. 

*  The  following  tabular  statement  shows  what  striking  changes  have  taken  place 
in  the  population  of  the  islands.  The  total  population  is  supposed  to  have  declined 
enormously  since  their  discovery;  and  beyond  doubt  it  declined  very  rapidly  until 
the  date  of  reciprocity  (1876).      It  is  estimated  to  have  been  300,000  in  the 


68 


SOME  ASPECTS  OF   THE   TARIFF  QUESTION 


with  their  bankers  and  shipping  agents  and  other  associates,  and 
a  few  hangers-on;  all  dependent  on  a  single  industry  puffed  to 
unnatural  dimensions  by  legislative  favor,  —  this  is  not  a  welcome 
addition  to  the  American  commonwealths. 

Most  people  think  of  an  addition  to  a  nation's  dominions  as 
they  do  of  an  addition  to  an  individual's  possessions.  John 
Smith  is  more  prosperous  if  he  acquires  more  real  estate;  and  the 
United  States  are  supposed  to  be  more  prosperous  if  they  acquire 
more  territory.  Hence  we  were  willing  to  pay  twenty  millions 
for  the  Philippines,  and  think  we  did  well  to  get  Hawaii  of  its  own 
offering  and  Porto  Rico  by  right  of  conquest.  In  truth,  they  have 
been  doubtful  boons.  If  indeed  new  acquisitions  serve  to  open, 
for  settlement  and  utilization  by  a  vigorous  race,  territory  that 
otherwise  would  have  lain  fallow,  there  is  a  real  gain.  Such  was 
the  result  of  the  Louisiana  purchase,  and  of  the  acquisition  of 
Texas  and  of  the  Pacific  coast.  These  expansions,  too,  made  pos- 
sible a  great  extension  of  the  geographical  division  of  labor.  But 
no  such  gains  have  come  from  our  newly  acquired  dependencies. 
It  is  difficult  to  find  in  the  whole  Hawaiian  episode  anything  but 

eighteenth  century.  In  1832,  when  the  first  census  was  taken,  130,000  were 
enumerated  (Coman,  p.  7).     For  some  later  years  these  are  the  census  figures: 


1853 


1872 


1884 


1896 


1900 


1910 


Total  Population 

Pure  Hawaiian 

Part-Hawaiian 

Foreign  born  Chinese .  . 
Foreign  born  Japanese . 
All  other 


73.138 

70,036 

983 

361 

1.755 


56.897 

49,044 

1.487 

1.938 

4,428 


80,578 
40,014 
4,218 
17,937 
116 
18,293 


109,020 
31.019 
8,48s 
19,382 
22,329 
27,805 


154,001 
29,799 
7.857 
21,746 
56,230 
38,369 


191,909 
26,041 
12,506 
21,674 
84,207* 
47,48i 


•  Including  Koreans. 

It  will  be  seen  that  the  total  population  declined  until  the  reciprocity  period  was 
reached;  that  the  native  born  Hawaiians  (including  all  born  in  the  islands,  whether 
or  no  of  the  original  stock)  declined  in  numbers  steadily,  both  before  reciprocity 
and  after;  and  that  the  marked  growth  in  the  total  since  reciprocity  has  come 
chiefly  from  the  appearance,  successively,  of  the  Chinese  and  Japanese.  —  The 
figures  are  taken  from  Bulletin  of  the  Department  of  Labor,  1903,  p.  369,  and  from 
the  13th  Census  Bulletin  on  the  Population  of  Hawaii. 

Since  1910  a  new  element  has  appeared  in  Hawaii,  —  the  Philippinos;  these  con- 
stituted in  1910-12  the  most  numerous  Asiatic  immigrants  to  the  islands.  Publ. 
Amer.  Statist.  Assoc,  June,  1913,  p.  466. 


HAWAII  69 

one  long  course  of  error.  The  American  consumer  paid  for 
thirty  years  (barring  the  brief  respite  while  the  McKinley  Tariff 
was  in  force)  a  tidy  sum  annually  to  the  Hawaiian  planters.  In 
the  later  years  of  the  period  this  tribute  amounted  to  twelve  or 
fifteen  millions  of  dollars  a  year.  For  this  there  has  been  nothing 
of  any  real  value  to  show,  —  unless  it  be  a  stepping-stone  to  the 
Philippines,  another  dependency  hardly  less  unprofitable.1 

1  I  have  left  this  chapter  unchanged  as  it  stood  in  the  first  edition,  published  in 
1915.  The  report  on  Cane  Sugar  made  by  the  Department  of  Commerce  in  1917 
and  referred  to  above  (p.  57  note)  gives  a  wealth  of  added  detail  on  the  Hawaiian 
sugar  industry  as  it  stood  in  19 14,  and  more  particularly  brings  out  the  great  diver- 
gences in  costs  of  production  between  different  plantations  in  the  islands.  So  far  as 
concerns  the  questions  of  principle  and  their  application  to  the  Hawaiian  situation, 
as  discussed  in  the  text,  no  modification  was  called  for  by  this  added  evidence. 


CHAPTER  VI 

PORTO  RICO;  THE  PHILIPPINES;   CUBA 

The  war  with  Spain  brought  new  complications  of  every  sort, 
and  among  them  none  more  striking  than  those  in  the  sugar 
situation.  In  addition  to  Hawaii,  Porto  Rico  and  the  Philip- 
pines became  territory  of  the  United  States.  Cuba  was  attached 
to  this  country  by  political  and  industrial  ties.  These  three,  as 
well  as  Hawaii,  were  producers  of  sugar.  With  regard  to  all, 
essentially  the  same  problems  arose. 

The  case  of  Porto  Rico  was  almost  precisely  like  that  of  Hawaii. 
The  consequence  of  our  acquisition  of  Porto  Rico  was  that  after 
1 90 1,  this  island  was  treated  as  an  integral  part  of  the  United 
States.  Its  sugar,  as  well  as  its  other  products,  became  exempted 
from  duty.  Porto  Rico  was  from  the  very  outset  in  the  position 
which  Hawaii  obtained  through  its  annexation  in  1898.  Even 
more  promptly  and  unconditionally  than  the  other  dependency, 
it  was  brought  within  the  pale  of  the  protective  system. 

It  need  not  be  explained  again  why  sugar  from  Porto  Rico, 
like  that  from  Hawaii,  was  sold  in  the  United  States  at  the 
duty-paid  price,  though  itself  free  of  duty.  The  imports  from 
the  island  (or  supplies,  —  since  in  the  view  of  the  law  they  are 
not  "  imports  ")  had  not  been  considerable  before  1900,  having 
ranged  not  far  from  100  million  pounds  a  year.  After  the  date 
when  the  favored  treatment  began,  they  rose  fast.  They 
doubled  within  three  years,  increased  to  nearly  500  millions  in 
1909,  and  were  (in  round  numbers)  765  millions  in  1913.  Call 
it  subsidy,  bonus,  protection,  whatever  name  you  will:  the 
obvious  fact  was  that  the  American  consumer  paid  the  full  tax, 
which  went,  however,  not  to  the  federal  Treasury  but  to  the 
Porto  Rican  planters. 

Whether  the  planters  made  unusual  profits  depended,  as  in  the 
case  of  Hawaii  and  Louisiana,  on  their  facilities  for  production. 
According  as  these  were  more  or  less  good,  the  bonus  operated 

70 


PORTO  RICO;  THE  PHILIPPINES;  CUBA  7 1 

either  to  put  extra  gains  into  their  pockets  or  to  sustain  them 
with  no  exceptional  profit  in  an  industry  carried  on  under  un- 
favorable conditions.  The  rapid  and  continuous  increase  of  the 
sugar  output  seemed  to  indicate  that  the  conditions  were  favor- 
able and  that  the  planters  profited  handsomely.  When  an  in- 
dustry doubles  its  output  every  five  years  (such  was  roughly  the 
rate  at  which  Porto  Rican  sugar  increased  during  the  decade  1900- 
19 10)  it  is  reasonable  to  infer  that  the  profits  are  more  than 
generous.  On  the  other  hand,  well-informed  persons  state  that 
the  land  readily  available  for  sugar  growing  is  limited.  Though 
some  parts  of  the  island  have  land  equal  to  the  best  in  Cuba, 
there  is  not  enough  for  indefinite  extension.  Porto  Rico  is  every- 
where mountainous;  the  flat  areas  along  the  coast  and  in  the 
valleys,  alone  available  for  sugar  culture,  are  not  large.  Hence 
the  prediction  was  made  that  even  with  the  bonus  from  the  sugar 
duty  the  output,  while  it  might  approach  1,000  millions,  could 
not  exceed  that  quantity.1 

In  Porto  Rico,  as  in  Hawaii,  the  situation  led  to  attempts  to 
extend  cultivation  and  push  the  yield.  Sugar  growing  was  made 
profitable  under  conditions  that  would  not  have  allowed  a  profit 
without  the  bonus.  Rainfall  and  water  supply  again  were  of 
the  first  importance.  The  island  is  divided  from  east  to  west 
by  a  mountainous  ridge,  which  causes  the  precipitation  (here 
chiefly  borne  by  northeast  winds)  to  be  heavy  on  the  northern 
side,  but  on  the  southern  side  insufficient  for  the  cane's  need 
of  abundant  moisture.2  The  insular  government  undertook 
great  irrigation  works,  involving  the  expenditure  of  millions  of 
borrowed  money,3  all  for  promoting  sugar  cane  culture;    with 

1  Statements  to  this  effect  have  been  made  to  me  by  persons  conversant  with 
sugar  planting  and  with  the  natural  conditions  in  Porto  Rico. 

2  "  The  average  annual  rainfall  throughout  the  dry  [southern]  zone  is  forty-six 
inches,  varying  between  twenty  and  sixty  inches.  The  average  amount  is  insuffi- 
cient for  the  cultivation  of  cane,  and  a  rainfall  approaching  the  minimum  is  a 
destructive  drought."  Report  of  the  Governor  of  Porto  Rico  (Commissioner  of 
Interior's  report),  191 1,  p.  139.  Cf.  Report  for  190Q,  p.  84,  for  an  account  of  the 
physical  geography  of  the  island. 

3  By  191 1,  bonds  to  the  amount  of  $4,000,000  had  been  authorized  for  irrigation 
works.  A  map  of  the  proposed  systems  is  in  the  Report  of  the  Governor  of  Porto 
Rico  for  1 91 1. 


72  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

the  expectation,  of  course,  that  payments  by  the  planters  for  the 
water  would  make  the  investment  remunerative.  From  the 
engineer's  point  of  view,  even  from  that  of  the  zealous  colonial 
administrator,  these  were  most  excellent  projects.  But  the  econo- 
mist must  question  whether  they  represented  a  fruitful  invest- 
ment, resting  as  they  did  on  the  unstable  foundation  of  prices 
raised  by  the  effect  of  duties. 

In  Porto  Rico,  as  in  Hawaii,  it  has  been  the  enterprising  and 
money-making  American  who  has  chiefly  profited.  "  The  lands 
suited  to  cane  culture  are  rapidly  passing  under  the  control  of 
wealthy  corporations,  by  purchase  or  by  contracting  for  a  term 
of  years  the  cane  of  the  '  colonos  '  or  farmers."  1  This  is  doubt- 
less inevitable.  The  same  transition  has  taken  place  as  in 
Louisiana  and  indeed  in  Cuba.  Cane  sugar  making  has  come 
to  be  a  large-scale  industry,  with  great  central  mills  to  which 
the  cane  is  brought  by  light  railways  for  crushing.  Only  those 
who  have  large  capital  can  embark  in  such  an  industry  with 
success,  and  it  is  they  who  are  likely  to  reap  the  larger  share  of 
any  unusual  profits.  As  an  American  official  remarks,  "it  is 
the  opinion  of  many  close  observers  that  the  colonos  and  the 
peons  who  do  the  field  work  are  not  getting  their  share  of  the 
product."  2 

Turn  now  to  the  Philippines.  They  were  long  treated  with 
less  generosity  than  Porto  Rico  and  Hawaii.  Imports  from  the 
Philippines  were  admitted  for  many  years  at  three-quarters  of 
the  ordinary  rates  of  duty.  The  sugar  duty  after  1897,  it  wi^ 
be  remembered,  was  1.62  cents  per  pound  on  the  grades  of  sugar 
usually  imported.3  Philippine  sugar  got  a  remission  of  one-quar- 
ter, about  two-fifths  cent  per  pound.  This  arrangement  con- 
tinued until  1909. 

1  Report  of  the  Governor  of  Porto  Rico  (Treasurer's  Report),  p.  85. 

2  Ibid. 

3  Philippine  sugar  was  and  is  of  lower  grade  (■/.  e.,  less  saccharine  content)  than 
that  usually  imported;  hence  the  duty  collected  on  it  was  less  than  the  figure 
stated  in  the  text,  and  the  remission  of  one-quarter  was  less.  These  differences, 
however,  affected  simply  the  method  by  which  the  duty  per  pound  of  raw  sugar 
was  adjusted  to  the  content  of  pure  sugar. 


k 


PORTO  RICO;  THE  PHILIPPINES;  CUBA  73 

The  difference  between  remission  of  the  whole  duty  and  of  a 
part  of  the  duty,  as  has  already  been  noted,  is  one  of  degree  only. 
In  neither  case  does  the  consumer  benefit.  The  favored  pro- 
ducer simply  gets  in  the  former  case  a  bonus  or  protection  of  the 
whole  of  the  duty,  in  the  latter  of  a  part  of  it.  So  with  regard  to 
the  Philippines:  during  the  period  from  1901  to  1909,  their  pro- 
ducers sold  the  sugar  at  the  full  duty-paid  price,  and  were  able 
to  keep  for  themselves  the  fraction  of  a  cent  which  the  United 
States  remitted  from  the  duties. 

So  moderate  a  degree  of  favor  had  no  considerable  influence 
on  the  imports  from  the  archipelago.  These  imports  had  never 
been  large;  and  they  showed  no  tendency  to  increase  during  the 
period  of  partial  remission.  Under  the  Spanish  regime,  sugar 
planting  had  been  carried  on,  as  had  most  other  industries,  in 
lazy  and  slipshod  fashion.  American  rule,  for  the  time  being 
at  least,  seemed  to  bring  no  change  in  this  regard.  The  bonus 
previous  to  1909  was  not  sufficiently  large  to  lead  to  any  change 
of  moment. 

In  the  tariff  act  of  1909,  however,  a  new  policy  was  adopted. 
Philippine  products  were  admitted  free,  and  among  them  sugar. 
This  remission  of  duty,  however,  was  not  unqualified.  Only 
300,000  gross  tons  of  sugar  (674  million  pounds)  were  to  come 
in  free;  any  amounts  beyond  this  limit  were  to  be  subject  to 
duty.1  The  restriction  was  due  to  a  fear  on  the  part  of  the 
domestic  producers  that  imports  might  increase  indefinitely:  a 
fear  justified  by  the  course  of  events  in  Hawaii  and  Porto  Rico. 
For  the  time  being  the  amount  allowed  was  generous  enough,  — 
far  in  excess  of  the  then  existing  sugar  output  in  the  Philippines. 
The  effect  on  that  output,  none  the  less,  was  immediate  and 
marked;  so  much  so  as  to  suggest  that  the  limit  might  have 
been  reached  within  a  few  years.  The  imports  of  sugar  from  the 
Philippines,  which  had  been  80  millions  of  pounds  in  1909,  rose 
to  not  less  than  435  millions  by  191 2.     The  remission  of  duty 

1  The  same  policy  was  adopted  in  the  tariff  of  1909  as  regards  tobacco  and 
cigars  from  the  Philippines:  free  admission  of  a  limited  quantity.  In  general, 
Philippine  products  "  which  do  not  contain  foreign  materials  to  the  value  of  more 
than  twenty  per  cent  of  their  total  value  "  were  made  free  of  duty.  Rice,  how- 
ever, remained  on  the  dutiable  list. 


. 


74  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

on  this  considerable  quantity,  as  need  hardly  be  repeated,  had 
the  same  effect  as  in  the  other  cases:  a  loss  of  revenue  to  the 
United  States  Treasury,  no  gain  to  consumers,  a  bonus  to  the 
Philippine  sugar  producers. 

The  tariff  act  of  1913  caused  this  situation  to  be  altered.  The 
restriction  on  the  amount  of  sugar  which  might  come  in  free  was 
removed;  it  was  provided  that  sugar,  like  other  Philippine  prod- 
ucts, should  be  admitted  without  limit  of  quantity.  But  the 
duty  was  designed  to  be  completely  removed  at  an  early  date 
(191 6)  from  all  sugar.  As  matters  turned  out,  when  1916  came 
around,  it  was  retained.  Had  its  retention  been  seriously  con- 
templated in  1 913,  the  unlimited  free  admission  of  Philippine 
sugar  would  hardly  have  been  granted.  Somewhat  unexpectedly, 
the  Philippine  producers  secured  for  an  indefinite  period  and 
without  limit  of  quantity  the  same  bonus  as  the  producers  in 
the  other  favored  districts,  —  about  one  a  cent  pound. 

The  liberal  treatment  of  the  Philippines  had  long  been  urged 
by  President  Taft,  whose  own  experience  in  the  government  of 
the  islands  led  him  to  regard  with  perhaps  sentimental  favor  all 
measures  for  their  benefit.  It  was  largely  through  his  influence 
that  the  free  admission  of  their  sugar  was  brought  about  in  1909. 
In  view  of  the  way  in  which  Hawaii  and  Porto  Rico  had  been 
dealt  with,  the  argument  for  extension  of  the  same  favors  to  the 
Philippines  was  wellnigh  unanswerable.  It  was  strengthened  by 
the  general  tenor  of  the  current  protectionist  reasoning,  —  the 
notion  that  duties  are  aimed  at  foreign  producers  and  are  borne 
by  them.1  In  fact,  the  duties  had  not  been  taxes  on  the  Philip- 
pine producers  at  all;  they  had  simply  served,  through  their 
previous  partial  remission,  to  give  a  partial  bounty;  they  now 

1  This  same  notion  appears  in  the  legislation  which  regulated  the  financial  rela- 
tions between  Porto  Rico  and  the  United  States  during  the  transitional  years 
immediately  after  the  conquest  of  that  island,  1898-1901.  The  revenue  from 
duties  collected  on  imports  from  Porto  Rico  was  put  into  a  "  trust  fund  "  to  be 
used  for  the  benefit  of  the  island,  and  in  due  time  was  so  used,  for  roads,  school- 
houses,  and  the  like.  (W.  F.  Willoughby,  Territories  and  Dependencies  of  the 
United  States,  pp.  113,  114.)  The  assumption  evidently  was  that  the  duties  had 
brought  a  burden,  not  on  American  consumers,  but  on  the  islanders,  and  was  no 
longer  to  be  left  on  them  once  they  became  a  part  of  us. 


PORTO  RICO;  THE  PHILIPPINES;  CUBA  75 

served,  through  their  complete  remission,  to  give  a  complete 
bounty. 

Last  in  the  list  of  dependencies  and  quasi-dependencies  comes 
Cuba. 

The  sugar  supplies  from  Cuba  were,  throughout  the  period 
under  discussion,  by  far  the  largest  constituent  in  the  total, 
ranging  from  one-third  to  nearly  one-half  of  the  amount  con- 
sumed in  the  United  States.  They  fell  off,  inevitably,  at  the 
time  of  the  insurrection  against  Spain  and  the  consequent  dis- 
ordered state  of  the  island;  but  after  the  restoration  of  peace 
the  normal  large  amounts  were  again  sent  to  the  United  States. 
Until  1903  they  were  subject  to  full  duty.  But  in  the  course 
of  the  new  arrangements  which  came  after  the  Spanish  war, 
Cuba,  like  the  Philippines,  was  given  a  favored  position.  When 
the  independence  of  the  island  was  finally  settled,  and  the  United 
States  troops  withdrew,  a  reciprocity  treaty  was  concluded  by 
which  Cuba  made  certain  reductions  of  duty  on  American 
products  imported  into  Cuba,  and  the  United  States  made  a 
general  reduction  of  twenty  per  cent  on  Cuban  products  imported 
in  the  United  States.  Sugar  was  by  far  the  largest  article  of 
import  from  Cuba,  and  the  significance  of  the  reduction  on  sugar 
was  shown  by  some  special  stipulations  regarding  this  com- 
modity. The  treaty  went  into  effect  in  1903.  Cuban  sugar 
thereafter  was  admitted  at  a  reduction  of  about  one-third  cent 
from  the  full  duty.1 

1  It  was  particularly  provided  that  "  no  sugar  imported  from  Cuba  .  .  .  shall 
be  admitted  into  the  United  States  at  a  reduction  of  duty  greater  than  twenty  per 
cent  [of  the  rates  of  1897]  .  .  .  and  no  sugar,  the  product  of  any  other  foreign 
country,  shall  be  admitted  by  treaty  or  convention  into  the  United  States,  while 
this  convention  is  in  force,  at  a  lower  rate  than  that  provided  by  the  tariff  act  .  .  . 
of  1897."  In  the  tariff  act  of  1913  provision  was  made  for  putting  an  end  to  this 
restriction  on  the  tariff  legislation  of  the  United  States. 

Cuba  admitted  a  large  list  of  United  States  articles  at  reductions  of  25,  30,  and 
40  per  cent;  the  most  important  being  in  the  schedule  which  granted  a  reduction 
of  30  per  cent.  The  treaty  was  to  remain  in  force  for  five  years,  thereafter  ter- 
minable on  a  year's  notice. 

Most  Cuban  sugar  is  of  the  grade  (testing  950)  which  was  dutiable  under  the 
tariff  acts  of  1897  and  1909  at  1.65  cents;  20  per  cent  of  this  is  .33  cent;  the  net 
duty  on  Cuban  sugar  was  thus  1.32  cents. 


76  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

So  long  as  imports  paying  full  duty  came  in  from  other  sources, 
this  reduction  must  be  expected  to  enure  to  the  benefit  of  the 
Cuban  producer,  not  of  the  American  consumer.  The  case 
would  seem  to  differ  from  that  of  the  Philippines  (until  1909) 
in  degree  only.  Though  the  sugar  imports  from  Cuba  had 
always  been  large,  and  became  even  larger  under  the  influence 
of  the  favored  treatment,  they  were  in  no  year  sufficient  to  dis- 
place entirely  the  full-duty  sugar  from  other  countries.  These 
full-duty  imports  became,  it  is  true,  small  in  proportion  to  the 
total.  They  diminished  to  less  than  ten  per  cent  of  the  total 
consumption,  and  in  some  years  to  hardly  more  than  five  per  cent. 
But  this  small  percentage  still  meant  imports  that  were  large 
absolutely:  hundreds  of  millions  of  pounds  came  in  each  year, 
and  they  paid  duties  amounting  at  the  full  rate  to  several 
millions  of  dollars.  These  continuing  imports,  by  no  means 
small  or  sporadic,  would  seem  to  prove  that  the  price  of  all  the 
sugar  consumed  was  raised  by  the  full  amount  of  the  duty,  that 
the  American  consumer  got  no  benefit  from  the  Cuban  remission, 
and  that  the  Cuban  producer  got  a  gratuity  of  one- third  cent  on 
each  pound. 

This  conclusion,  however,  is  subject  to  a  qualification  of  the 
kind  considered  in  the  first  chapter  of  this  book: *  a  qualification 
which  shows  once  again  the  need  of  watchfulness  in  drawing 
inferences  from  the  bare  statistics. 

The  Cuban  sugar  supply  was  so  large,  and  the  proportion  of 
full-duty  sugar  so  small,  that  the  situation  began  to  approach 
that  which  would  appear  if  full-duty  sugar  had  been  completely 
pushed  out  of  the  United  States  market.  Had  this  result  been 
reached,  —  had  importation  from  non-favored  regions  ceased,  — 
the  relaxed  duty  on  Cuban  sugar  would  have  been  the  only  one 
in  fact  collected,  and  the  price  of  sugar  in  the  United  States 
would  have  been  raised  not  by  the  amount  of  the  nominal  duty, 
but  by  that  of  the  Cuban  duty,  —  not  by  1.65  cents,  but  by  1.33 
cents.  All  the  other  preferences  to  sugar  producers,  both  those 
in  the  United  States  proper  and  those  in  the  several  dependencies, 
would  have  been  reduced  to  the  same  extent.     The  rapid  exten- 

1  See  p.  16  above. 


PORTO  RICO;   THE  PHILIPPINES;  CUBA  77 

sion  of  production  in  the  various  favored  regions  threatened  to 
bring  about  this  result,  —  surely  one  to  be  welcomed  by  the 
American  consumer.  Though  this  consummation  was  not  quite 
reached  in  the  later  years  of  our  period,  say  in  1906-1913,  the 
approach  to  it  caused  an  appreciable  relaxation  of  the  burden 
from  the  full  duty  and  some  diminution  of  the  gratuity  to  the 
privileged  producers. 

Raw  sugar  has  come  on  the  American  market  in  recent  times 
by  instalments  distributed  unevenly  through  the  year.  The 
domestic  beet  sugar  (of  which  more  will  be  said  presently)  is 
marketed  during  the  autumn  months;  but  this  supply  reaches 
chiefly  the  western  region,  beyond  the  Missouri  river.  Toward 
the  end  of  the  year,  the  Louisiana  crop  appears,  followed  in 
January  by  that  from  Cuba  and  Porto  Rico.  During  the  first 
quarter  of  each  year,  from  January  until  April  and  May,  these 
West  Indian  supplies  are  virtually  the  only  ones  available.  Then 
follows  a  comparatively  lean  period,  in  summer,  when  imports 
from  Java  come  in;  these  are  (or  were)  the  main  full-duty  im- 
ports. The  Hawaiian  crop  also  arrives  between  the  early  spring 
and  December.  Of  all  the  several  supplies,  that  from  Cuba  is  by 
far  the  largest;  so  much  so,  that  during  the  early  months  of  the 
year,  it  dominates  the  market.  Virtually  no  other  duties  were 
paid  at  this  season  than  those  at  the  reduced  rate  on  Cuban  sugar. 
Under  such  circumstances  it  might  happen  that  for  the  time  being 
the  domestic  price  was  settled  solely  by  the  Cuban  rate,  —  i.  e., 
the  outside  price  plus  the  duty  on  Cuban  sugar;  or  that  some 
Cuban  producers  held  back  a  considerable  part  of  their  sugar, 
waiting  for  the  later  months  when  the  price  would  again  rise  to 
the  full-duty  level,  and  maintaining  the  price  for  the  time  being 
at  a  point  somewhere  between  full  duty  and  Cuban  duty.  Con- 
ceivably, so  much  of  the  supply  might  be  thus  held  back  as  to 
keep  the  price  throughout  at  the  full-duty  level.  In  fact,  it 
was  the  intermediate  stage  which  seems  to  have  been  settled  by 
the  higgling  of  the  market,  with  variations  in  different  years  and 
in  different  months  of  any  one  year.  The  Cuban  planter  did 
not  get  the  whole  of  his  differential  tariff  advantage;  but  neither 
did   the   domestic   purchaser.      The   case  shows   the  need   of 


78  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

caution  in  inferring  once  for  all,  from  the  continuance  of  imports, 
that  every  part  of  the  supply  is  necessarily  raised  in  price  by  the 
maximum  duty  imposed  on  any  part  of  the  imports.  Here,  as  in 
other  parts  of  the  economic  world,  there  are  eddies  and  cross- 
currents which  must  be  watched  and  understood.1 

Needless  to  say,  such  a  transition  period  could  not  last  indefi- 
nitely. The  steady  increase  from  the  various  favored  sources 
of  supply,  —  Hawaii,  Porto  Rico,  the  Philippines,  Cuba,  and  the 
domestic  beet-sugar  region,  —  was  sure  in  time  to  drive  out 
completely  the  full-duty  sugar,  and  to  leave  sugar  from  Cuba 
alone  dutiable.  Then  this  alone  would  affect  the  domestic 
price,  and  the  differential  advantage  to  the  Cuban  planter  would 
cease. 

During  the  transition  period,  though  the  Cuban  planter  failed 
to  keep  for  himself  the  reduction  in  duty,  the  domestic  consumer 
did  not  necessarily  secure  it.  Such  a  seasonal  and  intermittent 
concession  in  price  as  the  Cuban  sellers  were  forced  to  make  was 
likely  to  be  absorbed  by  one  or  another  of  the  various  intermedi- 
aries who  intervene  before  the  sugar  finally  passes  over  the  re- 
tailer's counter.  It  would  appear  that  the  refiners,  who  stand 
first  in  the  chain  of  middlemen,  kept  some  slice  of  the  concession 
for  themselves.  It  is  quite  possible  that  the  wholesale  and  retail 
dealers  kept  the  rest.  It  may  be  that  the  consumer  got  a  frac- 
tion of  it,  either  directly,  or  indirectly  in  the  form  of  "  bargains  " 
in  other  articles,  made  possible  by  a  shading  of  the  terms  on 
which  the  dealer  secured  his  sugar.2  The  connection  between 
wholesale  prices  and  retail  is  a  loose  one;  all  that  can  be  laid 
down  is  that  a  long-continued  decline  in  wholesale  prices  has  its 
effect  ultimately  in  lowering  retail  prices  also,  and  that  this  is 

1  Until  about  1909  the  planters  seem  to  have  got  the  full  benefit  of  the  "  dif- 
ferential "  on  Cuban  sugar.  Thereafter,  as  their  increased  output  pressed  on  the 
American  market  during  the  spring  months,  the  American  purchasers  began  to 
get  part  of  it.  By  191 2  and  1913  the  Cubans  seem  to  have  lost  even  the  whole, 
at  least  during  part  of  the  season;  this  is  to  be  inferred  from  the  fact  that  con- 
siderable quantities  of  Cuban  sugar  then  were  sold  in  England.  See  the  Record 
in  the  suit  of  U.  S.  Govt.  v.  Am.  Sug.  Ref.  Co.,  pp.  7926,  7929. 

2  The  head  of  the  well-known  firm  of  sugar  brokers,  Willett  and  Gray,  estimated 
that  for  the  years  from  1903  to  191 1  the  amount  remitted  on  Cuban  sugar  was 


PORTO  RICO;  THE  PHILIPPINES;  CUBA  79 

likely  to  be  the  case  even  if  the  wholesale  fall  is  not  large.  Spas- 
modic and  irregular  changes,  on  the  other  hand,  even  though  con- 
siderable, are  more  likely  to  dissipate  their  effects  before  the  retail 
purchaser  is  reached. 

divided  between  Cuban  planter,  American  refiner,  and  American  purchaser  in  these 
proportions: 

Total  remission  (on  the  basis  of  g6°  sugar) $o-337 

Received  by  the  Cuban  planter $0,097 

"  "     "    refiner 063 

"  «     «    consumer 177 

$0,337 

"  Consumer  "  here  signifies  the  purchaser  from  the  refiner  (wholesale  dealer) . 
Hardwick  Committee  Report  (1911),  p.  3551. 

No  essential  changes  in  the  conditions  of  competition  between  the  different  pro- 
ducing regions  took  place  after  the  first  edition  of  this  book  was  published  (1915). 
Cuban  sugar,  however,  displaced  more  and  more  completely  the  full-duty  sugar; 
and  the  Cuban  duty  came  to  be  with  less  and  less  modification  the  effective  rate 
borne  by  the  consumer.  The  great  war  led  soon  to  a  sharp  rise  in  the  price  of  sugar 
throughout  the  regions  that  supplied  the  United  States  and  the  Allies,  and  all  en- 
gaged in  the  industry  made  most  handsome  profits.  These  extraordinary  changes, 
however,  did  not  alter  the  relative  conditions  of  the  different  producers  supplying 
the  United  States.  The  analysis  made  in  the  text  remains  applicable  to  the  later 
conditions;  the  general  range  of  sugar  prices  went  up,  but  the  differentials  and 
bonuses  remained  in  essentials  unchanged. 

As  regards  Cuba  as  well  as  the  other  cane  regions  from  which  sugar  supplies  came 
to  the  United  States,  detailed  and  accurate  information  is  given  in  the  Department 
of  Commerce  report  on  cane  sugar  (see  p.  57,  above),  published  after  the  appearance 
of  the  first  edition  of  this  book.  The  figures  on  cost  of  production  given  in  this 
document  show  strikingly  how  more  favorable  are  the  natural  conditions  in  Cuba 
than  elsewhere.  The  average  cost  of  production  (made  up,  to  be  sure,  from  greatly 
varying  costs  in  the  individual  plantations  and  mills)  was  found  to  be,  in  the  year 
considered  (191 3- 14), 

in  Cuba  $28.92  per  ton,  or  1.446  cents  per  pound. 

"Hawaii        $44-59    "     "     "    2.229     "       "        " 
"Hawaii        $44-59    "      "     "    2.229     "       "        " 
"Porto  Rico  $52.29    "      "     "    2.614     "       " 
"Louisiana    $79.50   "     "     "    3-975     "       "        " 


CHAPTER  VII 

Beet  Sugar 

The  beet-sugar  industry  presents  questions  essentially  different 
from  those  considered  in  the  preceding  chapters.  The  sugar  beet 
is  grown  in  the  temperate  zone,  and  its  cultivation  is  one  among 
many  possible  forms  of  agriculture.  In  view  of  its  peculiar 
position  and  significance,  it  deserves  careful  and  detailed  consid- 
eration. 

Chronologically,  the  beet-sugar  supply  is  among  the  later  addi- 
tions to  the  total  for  the  United  States.  Barring  a  slight  amount 
from  one  or  two  California  enterprises,  no  beet  sugar  at  all  was 
produced  in  the  country  before  1890.  The  bounty  given  by  the 
tariff  act  of  that  year  (1890)  is  often  referred  to  in  the  literature 
on  the  subject,  especially  that  put  forth  by  protectionists,  as 
having  had  a  stimulating  effect  on  the  industry.  Though  this 
bounty  was  no  more  than  an  equivalent  for  the  duty  then  re- 
mitted, it  may  have  given  some  impetus,  for  the  same  psycho- 
logical reasons  as  in  the  case  of  the  Louisiana  planters.1  Several 
states  also  gave  bounties  for  the  production  of  beet  sugar,  usu- 
ally moderate  in  amount  and  limited  in  time;  these  constituting, 
so  far  as  they  went,  a  substantial  bonus.2  Probably  no  less 
effective  than  the  bounties  at  the  start,  and  more  effective  as 
time  went  on,  was  the  propaganda  of  the  Department  of  Agri- 
culture. That  Department  preached  beet  sugar  in  season  and 
out  of  season;   spread  broadcast  pamphlets  dilating  on  the  ad- 

1  "  It  is  certain  that  it  [the  tariff  act  of  1890]  gave  new  hope  to  both  operators 
and  growers,  and  between  the  time  this  act  went  into  effect,  in  October,  1890,  and 
the  following  June,  some  $6,000,000  had  been  invested  in  beet-sugar  factories  in 
this  country.  .  .  .  This  small  bounty,  even  for  a  brief  time,  was  a  wonderful 
stimulus  to  the  struggling  industry."  G.  W.  Shaw,  in  Bulletin  no.  149  (The  Cali- 
fornia Sugar  Industry)  of  the  University  of  California,  1903,  p.  17.  Cf.  p.  55 
above,  on  the  Louisiana  situation. 

2  On  the  bounties  which  several  states  have  given,  see  a  note  by  Mr.  P.  T.  Cher- 
ington,  in  the  Quarterly  Journal  of  Economics,  February,  1912,  p.  381. 

80 


BEET  SUGAR  8 1 

vantages  of  beet  growing  for  the  farmer  and  giving  minute  direc- 
tions on  methods  of  cultivation;  maintained  a  special  agent,  who 
kept  in  touch  with  the  manufacturers  and  farmers,  and  annually 
reported  on  the  progress  of  the  industry.  The  result  was  famili- 
arity with  the  possibilities  throughout  the  country,  the  removal 
of  all  obstacles  from  inertia  and  ignorance,  and  a  rapid  develop- 
ment in  all  regions  where  there  was  a  promise  of  profits.1 

At  all  events,  the  beet-sugar  product  increased  rapidly  after 
1890.  It  quadrupled  between  1890  and  1900,  and  more  than 
quadrupled  between  1900  and  1910, — a  remarkable  rate  of 
growth.  Far  from  remaining  insignificant  and  quite  negligible, 
its  contribution  to  the  country's  sugar  supply  became  more  and 
more  important.  It  surpassed  that  of  Louisiana  cane  sugar, 
equalled  that  from  Hawaii,  and  itself  was  surpassed  only  by  the 
supply  from  Cuba.  In  round  numbers,  over  one  billion  pounds 
of  beet  sugar  were  produced  in  each  of  the  four  years,  1908-12. 
The  years  1912-13  and  1913-14  still  showed  a  marked  increase. 

Equally  significant  and  striking  was  the  geographical  distri- 
bution of  the  industry.  The  tabular  statement  on  the  next 
page  shows  what  that  distribution  was. 

One  fact  is  obvious  on  a  cursory  inspection  of  these  figures. 
The  beet-sugar  industry  is  in  the  main  massed  in  the  far  west,  — 
in  California,  Utah,  Colorado,  and  the  adjacent  region.  The 
agricultural  belt  of  the  central  states  has  a  very  slender  share. 
Only  one  state  in  this  part  of  the  country,  Michigan,  makes  a 
considerable  contribution  to  the  supply.  Wisconsin,  and  Ohio 
(not  separately  given  in  the  table)  each  adds  a  little.  No  other 
state  in  this  region  has  more  than  one  beet-sugar  factory.  Bar- 
ring Michigan,  the  production  of  beet  sugar  may  be  said  to  be 
confined  to  the  Rocky  mountain  and  Pacific  states. 

The  explanation  of  this  geographical  concentration  does  not 
lie  in  any  obstacles  from  climate  or  soil  in  other  parts  of  the 
country.     The  beet  flourishes  over  a  very  wide  area.     An  in- 

1  A  series  of  Special  Reports  on  the  Progress  of  the  Beet-Sugar  Industry  was 
issued  by  the  Department,  and  from  these  I  shall  quote  freely  in  the  following 
pages.  The  "  Special  Agent,"  though  by  no  means  a  scientific  person,  acquired 
and  diffused  much  information. 


82 


SOME  ASPECTS  OF   THE   TARIFF  QUESTION 


structive  pamphlet  issued  by  the  Department  of  Agriculture 
shows  the  zone  in  which  the  sugar  beet  may  be  expected  to 
"  attain  its  highest  perfection."  l  This  zone  or  belt,  two  hun- 
dred miles  wide,  starts  at  the  Hudson,  and  sweeps  across  the 
country  to  the  Dakotas;    turns  southward  through  Colorado, 

Beet-Sugar  Product  in  the  United  States 
(in  million  pounds) 


Total 

Cali- 
fornia 

Utah 

Colorado 

Michigan 

Wis- 
consin 

Other 
States 

I 899-00 

163 

85 

19 

2 

33 

.  . 

24 

1900-01 

172 

57 

17 

13 

55 

3° 

1901-02 

365 

140 

28 

45 

i°5 

6 

41 

1902-03 

438 

159 

38 

78 

109 

8 

46 

1903-04 

466 

136 

46 

89 

128 

11 

56 

1904-05 

470 

93 

57 

III 

104 

22 

83 

1905-06 

635 

144 

48 

209 

122 

27 

85 

1906-07 

970 

178 

82 

343 

177 

36 

154 

1907-08 

852 

180 

93 

245 

171 

37 

126 

1908-09 

1,025 

255 

98 

299 

212 

34 

127 

1909-10 

1,120 

280 

77 

206 

278 

36 

243 

1910-11 

1,019 

291 

76 

206 

260 

38 

148 

1911-12 

1,199 

323 

"5 

250 

251 

57 

203 

1912-13 

1,385 

3i8 

119 

432 

190 

46 

139 

1913-14 

1,467 

342 

114 

448 

244 

25 

140 

New  Mexico,  and  Arizona;  and  then,  turning  again,  proceeds 
west  and  northwest  through  California,  Utah,  Idaho,  and  the 
Columbia  valley.  It  includes  a  great  part  of  the  north  central 
region.  Yet  in  the  last  mentioned,  the  most  important  and 
productive  agricultural  region  of  the  country,  there  is  virtually 

1  H.  W.  Wiley,  The  Sugar  Beet,  p.  5.  This  pamphlet  has  been  published  in 
several  editions  by  the  Department  of  Agriculture;  my  references  are  to  the  edition 
of  1908  (Farmers'  Bulletin  52). 

In  the  Department's  Report  on  the  Sugar-Beet  Industry  for  1910  and  191 1,  at  p.  29, 
a  statistical  statement  is  given  of  the  millions  of  acres  in  the  country  (including 
such  states  as  Illinois,  Indiana,  Iowa,  Kansas,  Ohio)  adapted  to  sugar-beet  raising; 
and  the  complaint  is  made  that  "  if  one  farmer  in  four  of  these  states  were  to  plant 
a  three-acre  patch  and  give  it  the  care  that  could  readily  be  bestowed  on  so  small 
a  plot,  it  would  be  unnecessary  for  us  to  buy  foreign  sugar,"  —  a  mercantilist 
utterance  of  the  sort  often  found  in  the  Department's  publications. 


BEET  SUGAR  83 

no  beet  growing  or  sugar  making,  except,  as  just  mentioned,  in 
Michigan.  The  climatic  and  agricultural  possibilities  are  not 
turned  to  account  until  the  far  west  is  reached. 

The  reason  for  the  absence  of  beet  growing  and  hence  of  sugar- 
beet  production  in  the  north  central  region  is  to  be  found  in  the 
principle  of  comparative  advantage:  agriculture  is  applied  with 
greater  effectiveness  in  other  directions.  It  is  not  that  the  cli- 
mate or  soil  or  even  the  men  make  it  more  difficult  to  grow  beets 
here  than  in  Europe.  It  is  simply  that  other  ways  of  using  the 
land  are  found  more  advantageous. 

An  excellent  investigator  in  the  agricultural  aspects  of  the 
beet-sugar  industry  has  said:1  "The  growing  of  beets  is  not 
agriculture,  but  horticulture."  All  the  manuals  and  pamphlets 
insist  on  the  need  of  elaborate  preparation,  minute  care,  much 
labor  directly  in  the  fields.  The  planting  of  the  seed  does  indeed 
take  place  by  drills,  the  plants  coming  up  in  continuous  rows. 
But  after  this  first  operation,  painstaking  manual  labor  is  called 
for.  When  the  young  shoots  come  up,  they  need  first  to  be 
blocked,  then  thinned.  "  Blocking  "  means  that  most  of  the 
beets  in  the  rows  are  cut  out  by  a  hoe,  only  small  bunches  being 
left,  about  ten  inches  apart.  These  bunches  are  then  "  thinned  " ; 
every  plant  is  pulled  out  by  hand  except  one,  the  largest  and 
healthiest.  "  Great  care  should  be  exercised  in  this  work,  and 
by  careful  selection  all  the  inferior  plants  should  be  removed. 
.  .  .  When  thinning,  it  is  a  good  plan  to  give  the  ground  a 
thorough  hand  hoeing."  2  Throughout  the  growing  period  the 
beets  must  be  cultivated,  partly  with  a  horse  cultivator,  partly 
with  the  hand  hoe.  "  The  cultivator  and  the  hoe  should  be  used 
alternately  until  the  beets  are  too  large  for  horse  cultivation  with- 
out injuring  them.  Hand  laborers  should  continue  to  go  over 
the  beet  field,  pulling  the  weeds  and  grass  that  may  have  per- 
sisted." 3 

1  Professor  G.  W.  Shaw,  of  the  University  of  California;  among  his  various 
writings  see  the  pamphlet  on  Sugar  Beets  in  the  San  Joaquin  Valley,  p.  6;  Bulletin, 
no.  176,  Agricultural  Experiment  Station,  University  of  California. 

2  The  Sugar  Beet,  p.  20. 

3  Report  on  Progress  .  .  .  iQog,  p.  19.  The  same  story  appears  in  all  the 
accounts  of  beet-sugar  growing.     See  for  example  the  statements  of  Mr.  Hatha- 


84  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

Essentially  the  same  situation  appears  when  harvesting  is 
reached.  The  beets  may  be  first  loosened  by  a  plow  and  by  a 
lifter;  but  each  individual  beet  must  be  pulled  out  by  hand. 
Then  they  are  knocked  together  gently  to  remove  the  adhering 
dirt.  Finally,  they  are  "  topped  ";  that  is,  the  neck  and  leaves 
are  cut  off  with  a  large  knife.  "  The  removal  of  the  tops  of  the 
beets  is  a  tedious  process,  which  in  Europe  is  performed  by 
women  and  children.  .  .  .  Constant  supervision  is  necessary 
in  this  work."  x 

No  machinery  has  been  devised  that  serves  to  dispense  with 
the  large  amount  of  hand  labor  called  for.  "  Several  attempts 
have  been  made  to  construct  a  mechanical  device  by  which  the 
beets  can  be  topped,  thus  saving  a  large  expense,  and  perhaps  a 
successful  device  of  this  kind  may  some  day  be  invented.  So 
far  as  is  known  at  the  present  time  [1908],  however,  this  process 
has  not  been  successfully  accomplished  by  machinery,  and  the 
topping  must  still  be  done  by  hand."  2  "  Inventive  ingenuity  in 
Europe  and  especially  in  America,"  said  the  Special  Agent  of  the 
Department  of  Agriculture  in  1906,  "  has  been  directed  to  plan- 
ning a  harvester  which  will  do  away,  as  far  as  possible,  with  this 
expensive  hand  work.  ...  It  cannot  be  said  that  any  of  these 
newly-devised  implements  works  successfully  in  all  soils."  3  In 
1912  the  Department's  report  again  had  to  confess  that  "  a 
really  successful  beet  topping  and  harvesting  machine  "  was  yet 
to  be  devised,  and  that  "  at  present  all  the  operations  of  pulling, 
topping  and  loading  are  done  by  hand."  4 

It  follows  that  the  successful  growing  of  the  sugar  beet  calls 
for  a  large  amount  of  monotonous  unskilled  labor.  No  small  part 
of  it  is  labor  that  can  be  done  by  women  and  children  and 
tempts  to  their  utilization.  Not  only  does  the  typical  American 
farm  and  farm  community  lack  the  number  of  laborers  required; 
the  labor  itself  is  of  a  kind  distasteful  to  the  farmers.     "  Thinning 

way,  of  the  Michigan  Beet-Sugar  Company,  before  the  Committee  on  Ways  and 
Means  in  1909;   Tariff  Hearings  of  1909,  p.  331 1. 

1  The  Sugar  Beet,  pp.  21,  22. 

2  Ibid.,  p.  22  (1908). 

3  Report  on  Progress   .    .    .   1906,  p.  38. 

4  Report  for  1910  and  1911,  p.  64. 


BEET  SUGAR  85 

and  weeding  by  hand  while  on  one's  knees  is  not  a  work  or  pos- 
ture agreeable  to  the  average  American  farmer.  Bending  over 
the  rows  and  crawling  along  them  on  one's  hands  and  knees  all 
day  long  are  things  that  the  contracting  farmer  is  sure  to  object 
to  as  drudgery.  .  .  .  Our  farmers  ride  on  their  stirring  plows, 
cultivators,  and  many  implements."  l  As  was  remarked  by  a 
witness  at  a  tariff  hearing:  "  the  thinning  and  the  topping  of  the 
beets  it  is  pretty  hard  to  get  our  American  fellows  to  do,  and 
they  prefer  to  hire  the  labor  and  pay  for  it."  2 

Anticipating  for  a  moment  what  will  be  said  in  the  following 
paragraphs  of  the  beet-sugar  industry  of  the  Mountain  and 
Pacific  regions,  it  may  be  pointed  out  how  this  need  of  extra 
labor  has  been  met.  The  labor  situation  is  instructive  not  only 
as  regards  the  beet-sugar  industry  itself,  but  also  as  regards  the 
general  trend  in  the  United  States  during  the  last  generation. 

Almost  everywhere  in  the  beet-sugar  districts  we  find  laborers 
who  are  employed  or  contracted  for  in  gangs;  an  inferior  class 
which  is  utilized,  perhaps  exploited,  by  a  superior.  The  agricul- 
tural laborersin  the  beet  fields  are  usually  a  very  different  set  from 
the  farmers.  On  the  Pacific  coast  they  are  Chinese  or  Japanese. 
Except  in  Southern  California,  where  the  Mexicans  are  near  at 
hand,  most  of  the  work  is  done  by  Japanese,  under  contract; 
there  being  usually  a  head  contractor,  a  sort  of  sweater,  who 
undertakes  to  furnish  the  men.  In  very  recent  years  Hindus 
(brought  down  from  British  Columbia)  also  have  appeared  in  the 
beet  fields  of  California.  In  Colorado  "  immigrants  from  Old 
Mexico  compete  with  New  Mexicans  (i.  e.,  born  in  New  Mexico), 
Russians,  and  Japanese."  3  Indians  from  the  reservations  have 
been  employed  in  Colorado.  At  one  time,  convict  labor  was 
used  in  Nebraska.     In  some  parts  of  Colorado,  in  Montana,  and 

1  Report  on  Progress  .  .  .  iqo6,  p.  24.  A  correspondent  writes  me  from  Cali- 
fornia (191 2):  "  Otherwise  than  in  the  performance  of  such  labor  as  can  be  done 
with  teams,  very  few  Americans  undertake  hand  labor  in  the  beet  fields." 

2  Tariff  Hearings  of  1909,  p.  3418.  "  Americans  will  not  do  that  work;  not 
one  in  fifty,"  said  a  Colorado  beet  grower,  testifying  (in  191 1)  before  the  House 
Committee  to  investigate  the  American  Sugar  Refining  Co.;  Hearings,  p.  3192. 
Compare  a  similar  passage  in  Report  of  Kansas  State  Board  of  Agriculture  for  Sep- 
tember, 1906  (a  special  report  on  sugar  beets),  p.  20. 

3  V.  Clark,  in  Bulletin  Department  of  Labor,  September,  1908,  p.  483. 


86  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

at  the  beet  fields  of  the  single  factory  in  Kansas,  refugees 
from  German  colonies  established  long  ago  in  Russia  are  em- 
ployed. In  Michigan,  the  main  labor  supply  comes  from 
the  Polish  and  Bohemian  population  of  Cleveland,  Buffalo, 
Pittsburgh.  The  circulars  issued  by  the  Department  of  Agri- 
culture and  by  the  state  boards  and  bureaus  repeatedly  call  the 
attention  of  the  beet  farmers  to  the  possibility  of  employing 
cheap  immigrants.  The  troublesome  labor  problems,  it  is  said, 
need  not  cause  worry:  here  is  a  large  supply  of  just  the  persons 
wanted.  "  Living  in  cities  there  is  a  class  of  foreigners,  —  Ger- 
mans, French,  Russians,  Hollanders,  Austrians,  Bohemians,  — 
who  have  had  more  or  less  experience  in  beet  growing  in  their 
native  countries.  .  .  .  Every  spring  sees  large  colonies  of  this 
class  of  workmen  moving  out  from  our  cities  into  the  beet  fields."  ' 
The  sugar  manufacturers,  who  buy  the  beets  and  make  the 
sugar  in  their  factories,  play  a  large  part  in  bringing  this  labor  to 
the  fields.  Indeed,  they  play  a  large  part  in  every  phase  of  the 
industry,  —  on  its  agricultural  side  as  well  as  on  its  manufactur- 
ing side.  They  supply  seed;  give  the  farmers  elaborate  direc- 
tions on  methods  of  cultivation;  employ  supervisors  to  visit  and 
inspect  the  farms,  and  to  spur  the  farmers  to  the  needed  minute 
care;  of  necessity  they  test  the  beets  at  the  factory,  and  pay 
according  to  sugar  content;  and  they  often  undertake  to  pro- 
vide the  labor.  Sometimes  the  factories  contract  to  attend  to 
the  field  labor  themselves,  receiving  from  the  farmers  a  specified 
price,  —  so  much  for  bunching  and  thinning,  so  much  for  each 
hoeing,  so  much  for  topping.  The  farmers  then  have  nothing 
to  do  but  supply  "  reasonable  "  living  accommodations.2     More 

1  Report  on  Progress  .  .  .  1904,  p.  37.  Compare  the  Report  of  the  Kansas 
State  Board  of  Agriculture,  cited  above,  p.  19.  A  correspondent  writes  me  from 
Bay  City,  Michigan:  "  We  secure  the  laborers  in  such  centers  as  Cleveland,  De- 
troit, Chicago,  and  Pittsburgh,  and  these  laborers  when  brought  to  Michigan  make 
a  contract  with  the  farmer  to  take  care  of  his  beets  at  a  certain  sum  per  acre, 
averaging  about  $20  per  acre.  ...  It  is  safe  to  say  that  about  two-thirds  of  the 
beets  are  taken  care  of  by  outside  labor.  In  our  own  case  [a  large  sugar  company] 
we  probably  brought  in  about  1800  laborers."  On  some  smaller  beet  tracts  in 
Michigan,  the  farmers  and  their  families  do  the  work  themselves,  employing  no 
"  outside  "  labor. 

2  The  form  of  contract  used  by  the  Great  Western  Sugar  Co.  of  Colorado  is 


BEET  SUGAR  87 

often  farmers  not  thus  provided  for  secure  their  laborers  through 
contractors,  at  a  fixed  price  of  so  much  (varying  from  $15  to  $20) 
per  acre  for  all  the  work;  these  middlemen  being  hunted  up  or 
selected  for  the  farmers  by  the  factory  managers.  Such  "  sweat- 
ers "  make  a  profit  from  their  sub-contract  with  the  field  hands; 
the  system  being  open  to  the  possibilities  of  overreaching  which 
are  too  familiar  under  such  arrangements. 

All  this  is  part  of  the  transformation  which  has  been  wrought 
in  so  many  parts  of  our  social  and  economic  structure  during  the 
last  quarter  of  a  century  by  the  great  inflow  of  immigrants. 
Agriculture  as  well  as  manufacturing  industry  is  feeling  the  in- 
fluence of  the  new  conditions.  Laborers  from  the  congested 
foreign  districts  of  the  cities  — ■  Italians,  Bohemians,  "  Huns," 
"  Polacks,"  Russians  —  make  their  way  to  the  market  gardens 
surrounding  the  cities,  to  vegetable  districts  such  as  that  of  the 
Chesapeake  peninsula,  to  the  cranberry  fields  of  New  Jersey; 
these  do  the  hard  work  for  the  shrewd  Yankee  farmers.  Some  of 
them  may  be  on  the  way  to  the  acquisition  of  land  through  their 
savings.  But  certainly  for  the  time  being  the  conditions  are 
socially  and  industrially  unwelcome.  They  are  not  dissimilar  to 
those  of  the  Sachsengangerei,  of  ill  repute  in  eastern  Germany. 
They  are  very  different  from  the  conditions  which  we  think  of 
as  typical  of  agriculture  in  the  United  States.  As  in  these 
analogous  cases,  so  in  the  beet  fields,  there  is  an  agricultural 
proletariat. 

As  yet,  however,  the  main  agricultural  region  of  the  United 
States,  —  the  great  central  region  in  which  are  the  wheat  and 
corn  belts,  —  has  been  little  affected.  Here  we  still  find  exten- 
sive cultivation,  agricultural  machinery,  the  one-family  farm. 
It  is  true  that  during  the  harvest  season  there  is  a  heavy  demand 
for  agricultural  laborers,  and  that  this  is  satisfied  by  laborers  who 
may  be  said  also  to  constitute  an  agricultural  proletariat.  It  is 
true,  further,  that  the  stage  of  pioneer  farming  has  been  passed 
or  is  rapidly  being  passed,  that  rotation  is  becoming  more  sys- 

printed  in  the  Hearings  of  the  Committee  to  investigate  the  American  Sugar  Refining 
Co.  (1911),  p.  3186. 


88  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

tematic  and  skilful,  the  land  more  valuable,  cultivation  more 
intensive.  Nevertheless  this  remains  the  region  of  the  one- 
family  farm.  The  farmers  "  ride  on  their  stirring  plows  and 
cultivators  "  and  in  this  way  are  able  to  do  most  of  the  work  on 
their  lands  for  themselves. 

Throughout  the  corn  belt,  more  particularly,  there  is  no  sugar- 
beet  industry  of  any  moment.  It  pays  better  to  raise  corn; 
there  is  a  clear  comparative  advantage  in  corn  growing.  This 
grain  is  peculiarly  adapted  to  extensive  agriculture.  It  also 
lends  itself  readily  to  the  use  of  machinery;  corn  can  be  "  culti- 
vated "  between  the  rows  by  horse  power.  It  is  a  substitute  for 
root  crops,  and  can  be  rotated  steadily  with  small-grain  crops.1 
It  is  a  direct  competitor  with  the  sugar  beet  for  cattle  fattening. 
The  advocates  of  beet  raising  always  lay  stress  on  the  value  of 
the  beet  pulp,  the  residue  at  the  factory  after  the  juice  has  been 
extracted,  for  cattle  feeding.  But  corn  is  at  least  equally  valu- 
able for  the  purpose,  and  the  typical  American  farmer  raises  it  by 
agricultural  methods  which  he  finds  both  profitable  and  congenial. 
One  man  can  grow  forty  acres  of  corn.  He  can  plant  only  twenty 
acres  of  beets;  and  these  he  cannot  possibly  thin  and  top.2  In 
Iowa  "  the  farmers  are  progressive,  successful,  and  satisfied.  In 
fact,  this  has  been  the  main  obstacle  to  installing  the  sugar 
industry  there.  The  farmers  have  not  shown  a  disposition  to 
grow  the  beets.  When  the  farmers  are  advised  that  beet  culture 
is  accompanied  with  considerable  hard  work,  factory  propositions 
usually  succumb  to  the  inevitable.  The  farming  class  of  the 
state  is  accustomed  to  the  use  of  labor-saving  implements  in  the 
fields."  3 

It  is  not  an  accident  that  the  states  of  the  Great  Lakes  region 
in  which  the  sugar-beet  industry  has  shown  some  development, — 

1  See  the  excellent  analysis  by  Professor  H.  C.  Taylor,  in  Annals  of  the  American 
Academy  of  Political  and  Social  Sciences,  xxii,  p.  179  (1903).  Cf.  the  same  writer's 
Agricultural  Economics,  pp.  65  seq.,  and  Carver's  Rural  Economics,  p.  100.  Pro- 
fessor Taylor,  in  a  recent  paper  (The  Place  of  Economics  in  Agricultural  Education 
and  Research,  p.  96;  published  by  University  of  Wisconsin,  191 1)  states  more 
explicitly  his  conclusion  that  "  it  is  hardly  probable  that  the  sugar  beet  will  ever 
be  able  to  compete  with  corn  on  even  terms  in  the  corn  belt  of  the  United  States." 

2  Tariff  Hearings  of  1909,  p.  3417- 

3  Report  on  Progress   .    .    .   1904,  p.  56. 


BEET  SUGAR  89 

Michigan,  and  in  much  less  degree,  Ohio  and  Wisconsin,  —  are 
outside  the  corn  belt.  Except  along  the  southern  edge  of  these 
states,  the  grain  does  not  ordinarily  mature.  Yet  even  here  corn 
remains  a  formidable  competitor  of  the  sugar  beet,  in  its  use 
through  ensilage.1  It  is  cut  green,  stored  in  the  silos,  and  so  is 
available  for  cattle  feeding.  It  continues  to  be  available  in 
rotation  with  other  grain  and  with  grass.  During  the  last  two 
decades  Wisconsin  has  become  a  great  dairy  state.  "  The  past- 
ure, hay,  and  corn  lands  of  the  state  form  the  basis  of  the 
livestock  industry."  2  Here  there  is  a  profitable  system  of  agri- 
culture in  which  there  is  no  need  of  the  minute  attention,  the 
elaborate  cultivation,  the  wearisome  labor,  which  are  required 
for  the  sugar  beet.  As  compared  with  the  far  west,  Michigan 
and  Wisconsin,  as  will  presently  appear,  lack  some  climatic 
advantages.  A  tariff  subsidy  may  make  it  worth  while  for  their 
farmers  to  grow  the  beets;  but  without  the  subsidy  this  use  of 
the  land  cannot  compete  with  others  more  advantageous. 

When  the  tariff  legislation  of  19 13  was  under  consideration  the 
beet-sugar  makers  of  Michigan  pleaded  strenuously  for  the  main- 
tenance of  protection  on  the  ground  of  consideration  for  vested 
interests.  It  must  be  admitted  that  the  plea  was  in  one  regard 
of  exceptional  force.  Not  only  had  the  general  policy  of  protec- 
tion been  long  maintained  by  Congress,  and  investment  in  accord 
with  it  encouraged;  but,  as  one  of  the  witnesses  before  the  Ways 
and  Means  Committee  said  in  1909,  "  the  investment  which  our 
company  made  in  the  sugar  business  was  made  on  the  invitation 
and  urgent  advice  of  the  United  States  Government  through  its 
Department  of  Agriculture."  3  It  was  a  serious  responsibility 
which  the  Department  thus  took  on  itself.  Its  zeal  too  often 
was  ^discriminate.     Its  propaganda  rested,  in  part  at  least,  on 

1  My  colleague,  Professor  T.  N.  Carver,  states  to  me:  "  Corn  silage  will  furnish 
fifty  per  cent  more  feed,  acre  per  acre,  than  any  root  crop.  Moreover  it  costs  half  as 
much,  or  less  than  half,  to  grow  an  acre  of  silage  and  feed  it  as  it  does  to  grow  an  acre 
of  any  root  crop  and  feed  it.  The  only  chance  for  beet-root  cake  is  to  sell  it  as  a 
by-product,  the  balance  being  covered  by  the  profits  on  sugar." 

2  Progress  of  the  Dairy  Industry  in  Wisconsin,  by  H.  C.  Taylor  and  C.  E.  Lee, 
p.  7;  Bulletin  no.  210  of  the  Agricultural  Experiment  Station,  University  of  Wis- 
consin (191 1). 

3  Mr.  C.  N.  Smith,  in  the  Tariff  Hearings  of  1909,  p.  3317. 


90  SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

a  crudely  mercantilist  principle;  on  the  assumption  that  it  is 
desirable  to  produce  within  our  own  borders  anything  and  every- 
thing that  can  possibly  be  produced  there,  and  that  a  tariff 
policy  based  on  this  assumption  will  be  maintained  indefinitely. 

Turn  now  to  the  far  west,  where  most  of  the  beet  sugar  is 
made.  Two  conditions  are  favorable  to  beet  growing  in  this 
western  region:  the  climate,  and  the  special  advantages  of  irri- 
gation. 

The  variety  of  the  beet  suitable  for  sugar  making  flourishes  in 
a  cool  climate ;  but  it  needs  plenty  of  sun.  "  Abundance  of  sun- 
shine is  essential  to  the  highest  development  of  sugar  in  the  beet. 
Other  things  being  equal,  it  may  be  said  that  the  richness  of  the 
beet  will  be  proportional  to  the  amount  —  not  intensity  —  of 
the  sunshine."  1  Evidently  the  cool  region  of  cloudless  sky  in 
the  arid  west  meets  this  condition  perfectly. 

Again:  "  in  respect  to  moisture,  the  sugar  beet  is  peculiar  in 
some  respects.  .  .  .  There  are  three  periods  in  the  life  history 
of  the  sugar  beet  which  demand  entirely  different  treatment  so 
far  as  moisture  is  concerned:  (i)  the  gemiinating  or  plantlet 
period;  (2)  the  growing  period;  (3)  the  sugar-storing  period." 
During  the  first  "  the  beet  needs  sufficient  moisture  and  warmth 
to  germinate  and  start  it,  but  never  an  excess."  During  the 
second,  "  the  beet  needs  little  if  any  moisture."  During  the 
third,  or  sugar-storing  period,  "  the  plant  should  be  given  no 
water.  The  conditions  desirable  at  this  period  are  plenty  of  light 
and  dry  cool  weather.  If  the  beet  is  given  moisture  to  any  con- 
siderable extent,  it  will  be  at  the  expense  of  both  sugar  and 
purity."  2 

The  irrigated  regions  of  Colorado,  Utah,  Idaho,  Montana 
supply  just  the  right  combination  of  climate  and  moisture:  cool 
temperature,  abundant  sunshine,  moisture  as  needed,  absence  of 
moisture  when  harmful.  Hence  Colorado  and  Utah  are  de- 
scribed as  the  ideal  beet-sugar  states.  "  Considering  everything, 
Utah  is  the  ideal  beet-sugar  State.  ...     Its  natural  conditions 

1  Professor  G.  W.  Shaw  of  the  University  of  California,  in  the  pamphlet  already 
referred  to,  p.  6. 

2  I  quote  again  from  Professor  Shaw's  instructive  pamphlet,  at  pp.  16,  17. 


BEET  SUGAR  9 1 

are  quite  similar  to  those  of  Colorado."  l  In  Colorado  12  to  25 
tons  of  beets  to  the  acre  are  readily  secured;  even  in  the  early 
days  15  to  17^  tons  were  got  on  the  average;  whereas  in  Euro- 
pean countries  not  only  is  the  tonnage  per  acre  less,  but  the  sugar 
content  smaller.2  California,  where  the  industry  first  was  under- 
taken on  any  considerable  scale,  and  where  it  has  grown  steadily, 
has  some  special  advantages.  A  good  part  of  its  beet  district 
has  just  the  required  combination  of  climate  and  precipita- 
tion.3 

Contrast  such  exceptionally  favorable  climatic  conditions  with 
those  of  the  Great  Lakes  region.  The  successive  reports  of  the 
Department  of  Agriculture  dwell  on  the  uncertainty  of  the  beet- 
sugar  crop  in  this  zone  because  of  the  irregularity  of  rain  and 
sunshine.  The  Michigan  farmer,  unlike  the  grower  in  the  irri- 
gated region,  cannot  count  with  certainty  on  abundant  sunshine 
and  cannot  apply  moisture  exactly  when  needed:  difficulties 
which  threaten  not  only  the  quantity  of  the  crop  but  also  its 
saccharine  content.4 

1  Report  on  Progress   .    .    .   iqoq,  p.  37. 

2  Report  on  Progress  .    .    .   1904,  p.  46. 

3  "  The  exceptional  soil  and  climatological  conditions  in  California  seem  pecul- 
iarly adapted  to  the  production  of  beets  with  a  high  sugar  content.  While  their 
reported  yield  per  acre  is  not  so  great  as  that  of  some  other  states,  the  sugar  con- 
tent is  decidedly  in  excess  of  any  other,  so  that  with  an  acreage  considerably  less 
than  that  of  Michigan  the  total  yield  of  sugar  is  much  more.  The  calculated  }neld 
per  acre  for  the  past  season  was  very  nearly  3,310  pounds.  Many  of  the  Cali- 
fornia soils  are  very  retentive  of  moisture,  so  that  with  an  annual  rainfall  far  below 
that  of  the  central  and  eastern  part  of  the  country  beets  can  be  grown  successfully 
without  irrigation.  The  little  rain  which  they  have  is  usually  so  nicely  distributed 
through  the  early  and  middle  seasons  of  growth  as  to  leave  almost  ideal  conditions 
for  the  period  of  ripening,  with  its  accompanying  storage  of  sugar  in  the  cells. 
This  ripening  process  is  also  materially  assisted  by  the  alternation  of  cool 
nights  and  warm  days,  a  condition  which  seems  best  suited  to  the  formation  and 
storage  of  sugar  in  this  plant."  Report  on  Beet-Sugar  Industry  in  1910  and  1911, 
p.  19. 

I  take  some  satisfaction  in  recalling  that,  when  discussing  the  beet-sugar  situa- 
tion as  early  as  1889,  I  referred  to  the  unusual  possibilities  of  California.  "  It  is 
not  impossible,"  I  wrote  then,  "  that  the  extraordinary  combination  of  soil  and 
climate  in  California  may  bring  about  a  development  which  could  not  be  attained 
in  other  parts  of  the  country."     Quarterly  Journal  of  Economics,  iii,  p.  266,  note. 

4  References  to  the  vicissitudes  of  the  weather,  similar  to  that  quoted  in  the 
text,  abound  in  the  Department  of  Agriculture's  Reports  on  Progress,  e.  g.,  Report 


92  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

The  same  climatic  difficulties  are  encountered  in  the  European 
countries  where  sugar  beets  are  grown.  There  also  the  beet  har- 
vest and  the  sugar  output  are  greatly  affected  by  the  weather 
during  the  growing  and  harvesting  season.  The  north  central 
states  of  our  own  country  are  not  in  this  respect  at  a  disadvan- 
tage. But  they  possess  no  climatic  superiority  for  beet  growing; 
whereas  they  do  possess  agricultural  and  industrial  superiority 
for  other  crops.  Beet  growing,  in  other  words,  suffers  from  a 
comparative  disadvantage.  The  far  western  region,  on  the  other 
hand,  does  have  unusual  natural  advantages  for  the  sugar  beet. 
Whether  these  natural  advantages  are  so  great  as  to  enable  the 
industry  to  hold  its  own,  in  free  competition  with  cane  sugar  and 
with  beet  sugar  made  in  the  European  regions  of  permanently 
cheap  labor  supply,  is  another  question.  But  they  explain 
why,  under  the  stimulus  of  protection,  the  industry  grew  fast 
in  that  region,  and  in  widely  distributed  parts  of  it;  while  yet 
under  the  same  stimulus  it  made  little  progress  in  the  typical 
agricultural  states. 

It  is  constantly  said,  with  reference  both  to  the  mountain 
states  and  to  those  of  the  central  region,  that  the  culture  of 
the  sugar  beet  brings  special  agricultural  benefits.  The  high 
cultivation,  it  is  said,  improves  the  quality  of  the  land;  general 
fertility  is  enhanced;  a  better  rotation  is  established;  the  by- 
products, especially  the  beet  cake,  are  valuable  for  cattle  feed- 
ing, and  this  in  turn  provides  manure  and  maintains  fertility; 
the  factory  makes  a  market  for  local  coal  and  lime;  it  "  stimu- 
lates banking  and  almost  all  kinds  of  mercantile  business." 
These  advantages  have  been  dwelt  on  almost  ad  nauseam  in  the 

for  1903,  p.  139;  for  1904,  p.  113;   for  1909,  p.  46.     Concerning  the  effect  on  the 
quality  of  the  beets,  see  Report  for  1903,  p.  140;  for  1904,  p.  57. 

A  typical  statement  is  that  of  a  recent  report:  "  Normally,  the  length  of  the 
growing  season  is  sufficient  and  the  rainfall  is  ample  and  suitably  distributed 
throughout  spring  and  summer,  with  dry,  increasingly  cool,  fall  weather  to  afford 
conditions  needed  for  maturing  sugar.  It  is  to  be  noted,  however,  that  in  the 
case  of  the  last  crop  (191 1)  this  normal  condition  of  affairs  was  seriously  altered. 
A  fine  growing  season  was  followed  by  an  unusually  rainy  ripening  and  harvesting 
period,  so  that  what  had  given  promise  of  being  the  greatest  crop  ever  produced 
turned  out  very  poor  in  quality,  although  of  fair  tonnage."  Report  on  Beet-Sugar 
Industry  in  1910  and  1911,  p.  22. 


BEET  SUGAR  93 

publications  of  the  Department  of  Agriculture.1  So  far  as  the 
tariff  question  is  concerned,  they  prove  altogether  too  much. 
If  beet  culture  is  so  very  advantageous  for  the  farmer,  why  does 
he  need  a  bonus  or  protective  tariff  to  be  induced  to  engage  in  it  ? 
The  American  farmer  is  not  an  ignorant  or  stolid  person;  he  has 
access  to  a  multitude  of  educational  and  propagandist  agencies, 
and  is  even  beset  by  them;  he  is  a  shrewd  observer,  a  ready  in- 
novator. With  the  transition  from  pioneer  farming,  the  agri- 
cultural methods  of  the  central  region  have  been  revolutionized 
during  the  past  generation.  If  beet  culture  were  really  so 
advantageous  a  part  of  the  general  change,  we  might  expect  its 
speedy  and  wide-spread  adoption.  The  advocates  of  beet  grow- 
ing have  simply  accepted  the  common  and  fallacious  notion  that 
the  highest  cultivation  is  necessarily  the  most  advantageous  cul- 
tivation. The  agricultural  expert  is  apt  to  be  intent  on  the 
gross  product,  on  the  largest  yield  per  acre.  But  the  best  agri- 
culture is  that  which  secures  the  largest  yield  not  per  unit  of 
area  but  per  unit  of  labor.  Minute  cultivation  means  a  large 
product  per  acre  but  by  no  means  necessarily  a  large  product 
per  man. 

The  only  solid  ground  for  maintaining  that  protection  for  beet 
sugar  has  been  of  advantage  to  agriculture  is  that  of  the  young 
industries  argument.  Ignorance,  settled  habits  and  prejudices, 
unaccustomed  methods,  the  inevitable  failures  in  first  trials,  all 
these  obstacles  may  have  stood  in  the  way  of  the  beet-sugar 
industry  in  its  first  stages.  It  is  true  that  the  argument  for  pro- 
tection to  young  industries  was  not  supposed  to  apply  to  agricul- 
ture by  List  and  his  followers,  since  unalterable  conditions  of  soil 
and  climate  were  thought  to  determine  once  for  all  the  geographi- 
cal distribution  of  the  extractive  industries.  It  would,  perhaps, 
be  hazardous  to  lay  down  an  unqualified  proposition  of  this  sort. 
The  course  of  industry  may  conceivably  be  guided  and  diverted 
to  advantage  in  agriculture  as  well  as  in  manufactures.  The 
difference  between  the  two  cases  would  seem  to  be  simply  one  of 
probability,  of  degree.  None  the  less,  an  important  difference 
in  degree  remains.     It  is  more  likely  that  industry  will  pursue 

1  See  for  instance  Report  on  Progress   .    .    .   1901,  pp.  132  seq. 


94  SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

its  "  natural  "  course  in  agriculture  than  in  manufactures;  since 
agriculture  is  affected  much  more  by  the  physical  factors  of  soil 
and  climate  and  much  less  by  acquired  skill. 

There  are  still  other  grounds  for  questioning  the  applicability 
to  agriculture  of  the  young  industries  argument.     There  is  not 
in  agriculture  that  close  contact  between  different  producers  or 
that  stress  of  competition  between  them  which  is  most  likely  to 
lead  to  improvements;    and  a  stimulus  to  improvement  is  the 
essence  of  the  argument.     In  the  contemporary  German  contro- 
versy, considerations  of  this  sort  have  been  advanced  in  support 
of  the  duties  on  grain;  but  there  is  quite  as  much  weight  in  the 
counter  argument  that  agricultural  improvement  is  most  effec- 
tively spurred  by  adversity.     It  comes  not  from  high  prices  and 
easy  gains,  but  low  prices  and  the  need  of  facing  a  difficult  situa- 
tion.1    The  low  prices  of  sugar  which  prevailed  for  a  considerable 
period  (especially  in  the  decade  1890-1900)  proved  a  blessing  in 
disguise  to  the  Louisiana  sugar  planters;  their  methods  of  culti- 
vation and  sugar  extraction  were  improved  in  the  effort  to  meet 
conditions  of  depression.     The  same  seems  to  have  been  the  case 
with  the  Hawaiian  planters  during  the  period  (1890-94)  of  free 
sugar.2     It  has  already  been  pointed  out  how  difficult  it  is  to 
say  whether  protection  tends  on  the  whole  to  promote  technical 
improvement  or  to  retard  it.3    A  general  proposition  one  way  or 
the  other  would  be  as  hard  to  prove  conclusively  with  reference 
to  agriculture  as  with  reference  to  manufactures.      But  it  seems 
clear  that  acquired  skill  and  established  advantages  count  for 
more   in   manufactures    than   in   agriculture;    and   that   tariff 
protection  is  therefore  an  even  less  promising  device  for  pro- 
moting better  use  of  the  soil.     Education,  experiment  stations, 
diffusion    of    the    right   sort    of   information,  are   much   more 
promising.      But  education  and  the  spread  of  information,  to 
be  really  effective,  must  be   adapted  to  the  economic  condi- 
tions.     In  this  regard  our  Department  of  Agriculture  for  many 
years  showed  no  discrimination.     Under  the  Republican  regime 

1  See  Ballod,  in  Verhandlungend.  Vereins  f.  Sozialpolitik,  igog,  p.  143,  and  Esslen, 
Das  Gesetz  des  abnehmenden  Bodenertrags,  pp.  226,  237. 

2  Cf.  above,  p.  62.  3  See  chapter  ii,  p.  28,  above. 


BEET  SUGAR  95 

of  1897-1913  its  publications  were  pervaded  by  a  crude 
mercantilism.  Its  propaganda  for  beet  sugar  rested  not  on  the 
young  industry  and  eventual  independence  principle,  but  on  the 
crude  protectionist  doctrine  that  any  and  every  increase  of  domes- 
tic supply  was  necessarily  to  the  country's  advantage. 

Questions  in  some  respects  different  arise  concerning  the  beet- 
sugar  factory,  which  buys  the  beets  from  the  farmers  and  makes 
the  sugar.      Here  there  is  what  the  business  world  calls  "  a 
straight  manufacturing  proposition."      Whether  the  manufac- 
turing of  sugar  can  be  done  to  advantage  in  the  United  States 
depends  on  the  same  conditions  as  in  other  manufactures.    It  is 
much  affected  by  the  opportunities  for  using  machinery  and  for 
the  exercise  of  American  inventive  and  engineering  capacity  in 
improving  machinery.    Such  evidence  as  I  can  get  indicates  that 
so  far  as  this  branch  of  the  industry  is  concerned,  the  conditions 
are  not  unfavorable  to  its  sustained  prosecution  with  little  need, 
if  any,  of  tariff  support.     When  the  first  factories  were  built  in 
California  the  machinery  was  imported  from  Germany.     "  The 
Yankee  inventive  genius  of  machinery  men  at  once  took  hold  of 
the  matter,  making  so  valuable  improvements  that  both  the 
above  mentioned  factories  [at  Watsonville  and  at  Chino]  were 
shortly  refitted  with  machines  of  American  make,  and  every 
factory  in  this  country  in  the  last  few  years  has  purchased  Ameri- 
can machines."  l     So  in  the  Department  of  Agriculture's  pam- 
phlet on  the  industry,  it  is  stated  that  "  in  the  early  days  of  the 
beet-sugar  industry  in  this  country,  Europe  was  called  on  to 
furnish  all  machinery.     Now  very  little  is  imported,  and  in  fact 
some  of   the  foreign   factories  are   using  American-made  ma- 
chinery." 2     The  breaking  loose  from  European  tutelage  and  the 
introduction  of  technical  improvements  are  significant  indications 
of  the  successful  adaptation  of  a  new  industry  to  American  condi- 
tions and  of  the  ability  to  meet  foreign  competition  unaided.     It 

1  Shaw,  The  California  Sugar  Industry  (1903),  p.  17. 

2  The  Sugar  Beet  (1908),  p.  38.  Similar  statements  have  been  made  to  me  in 
conversation  by  persons  engaged  in  beet-sugar  making.  Others,  however,  no  less 
well  informed,  have  expressed  to  me  a  doubt  whether  any  appreciable  improvements 
have  been  made  by  the  American  makers,  especially  when  compared  with  what 
the  Germans  have  done. 


96  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

should  be  borne  in  mind,  moreover,  that  the  factory  managers 
take  an  active  part  in  directing  and  supervising  the  agricultural 
operations.  In  this  regard  there  seems  to  be  abundant  and 
successful  enterprise.  The  managers  of  the  beet-sugar  factories 
have  been  chiefly  instrumental  in  bringing  the  indispensable  labor 
supply  to  the  farms.  Through  traction  engines  and  the  like 
they  have  grappled  with  the  difficulties  of  transporting  the  beets 
from  the  field  to  the  factory.  They  have  selected  the  seeds, 
and  have  assiduously  spread  information  among  the  farmers  on 
the  best  ways  of  getting  a  large  tonnage  of  beets  and  a  large 
content  of  sugar.  In  the  far  west  especially,  all  this  activity 
has  been  carried  on  with  industrial  and  pecuniary  success. 
Neither  in  the  factory  itself  nor  in  the  problems  of  organization 
arising  from  the  interdependence  of  farm  and  factory  has  there 
been  a  lack  of  skill  or  energy.1 

It  is  probably  another  sign  of  successful  adaptation  to  new 
conditions  that  the  American  beet-sugar  factory  carries  its 
operations  a  stage  further  than  do  the  factories  of  Europe.  The 
latter  usually  produce  raw  sugar  only,  which  is  sent  to  refineries 
for  the  last  stage  of  preparation;  precisely  as  our  cane  sugar  is 
imported  in  the  "  raw  "  form,  and  goes  through  the  refineries 
before  being  marketed  for  consumption.  The  American  beet- 
sugar  factories,  on  the  other  hand,  make  refined  (granulated) 
sugar,  which  is  sold  at  once  to  the  grocers.  In  Europe  the  greater 
geographical  concentration  of  beet  growing  and  sugar  making, 
and  the  consequent  ease  of  transportation  to  refineries  near  by, 
probably  account  for  the  practice  there  prevailing.  The  differ- 
ent American  practice  doubtless  took  its  start  because  refining 
was  controlled,  during  the  earlier  years  of  beet  sugar,  by  the 
Sugar  Trust  and  its  affiliated  concerns;  but  it  persisted  because 
it  fitted  the  geographical  and  industrial  conditions  of  the  in- 
dustry.     Another  reason  is  that  in  continental   Europe   beet 

1  There  was  and  is  bickering,  inevitably,  between  the  farmers  who  grow  the 
beets  and  the  sugar  manufacturers;  the  farmers  maintaining  that  the  manufacturers 
beat  down  the  growers  and  pocketed  the  bulk  of  the  profits  for  themselves.  Very- 
likely  this  was  the  case;  but  the  growers  got  quite  enough  to  make  beet  culture 
worth  while,  as  is  proved  by  its  rapid  extension.  See  Hearings  on  the  American- 
Sugar  Refining  Co.  (Hardwick  Committee)  191 1,  pp.  3313  and  passim. 


BEET  SUGAR  97 

farming  and  sugar  making  constitute  commonly  one  integrated 
enterprise,  and  are  associated  either  with  estate  farming  on  a 
large  scale  or  with  direct  cooperation  between  large-scale  agricul- 
turists and  the  factory  owners.  A  different  sort  of  cooperation 
between  farm  and  factory  was  necessary  under  our  conditions  of 
land  ownership,  and  this  has  been  worked  out  successfully  by 
the  American  manufacturers.  Neither  in  the  technical  aspects 
of  the  manufacturing  industry,  nor  in  its  appropriate  organiza- 
tion, is  there  indication  of  disadvantage  in  the  United  States. 

This  brings  us  to  the  close  of  our  examination  of  the  sources 
of  sugar  supply,  and  their  relation  to  the  tariff.  Let  us  now, 
by  way  of  summary,  proceed  to  a  quantitative  estimate  of  the 
consequences  of  the  duty  on  raw  sugar;  postponing  for  the  mo- 
ment the  consideration  of  the  effect  (comparatively  slight,  as  will 
shortly  be  shown)  of  the  additional  duty  on  refined  sugar. 

The  burden  of  the  sugar  duty  can  be  measured  with  greater 
exactness  than  is  often  possible.  We  know  that  the  price  of 
sugar  was  raised  by  the  duty  throughout  the  area  of  consump- 
tion. In  this  case,  we  have  no  reason  to  question  the  significance 
of  continued  imports.  The  only  serious  qualification  which  needs 
to  be  made  is  that  which  arises  for  the  later  years  from  the 
uneven  and  irregular  effect  of  the  partial  remission  on  Cuban 
sugar.1  Except  for  this,  we  could  say  with  confidence  that  from 
1897  to  1913  the  price  of  sugar  was  raised,  the  country  over,  by 
the  full  amount  of  the  duty,  —  one  and  two-thirds  cents  a  pound. 
Allowing  for  the  modifying  influence  of  the  Cuban  remission,  we 
may  make  our  calculations  on  the  assumption  that  the  effect 
of  the  duty  during  the  years  immediately  preceding  1913  was 
to  raise  the  price  of  all  sugar  by  one  and  one-half  cents.  The 
figure  may  not  be  accurate  to  the  last  dot;  but  the  economist  is 
fortunate  when  he  can  measure  his  results  with  so  close  an 
approach  to  exactness  as  this. 

Of  the  tax  paid  by  consumers  in  the  form  of  enhanced  price, 
a  little  less  than  one-half  went  to  the  government  treasury;  the 
rest,  —  more    than   half,  —  was   handed   over    to    the   various 

1  Considered  in  the  preceding  chapter,  pp.  76  seq. 


98 


SOME  ASPECTS  OF  TEE  TARIFF  QUESTION 


favored  sugar  producers.  Let  us  imagine  the  United  States 
government  to  present  an  account,  rendering  to  its  wards,  the 
sugar  consumers,  a  statement  of  what  had  become  of  the  sums 
collected  from  them.  The  government  would  properly  enter  on 
the  debit  side  the  total  which  it  had  taken  from  the  consumers, 
on  the  credit  side  an  enumeration  of  the  various  ways  in  which 
it  had  distributed  the  total.  The  fiscal  year  1909-10  may  be 
taken  as  representative.  For  that  year  the  account  would 
stand  thus: l 

United  States  Government  in  Account  with  Sugar  Consumers, 
for  the  fiscal  year  igog-io 


Dr. 

Cr. 

On     300  mill.  lbs.  of  full-duty  sugar 

"  3,500     ■      "     "  Cuban 

"   1,100     "      "     "  Hawaiian     "       

"      570     "      ■     «  Porto  Rico  « 

"      1 75     ■      "     "  Philippine   " 

"       750     "       "     "  Domestic  Cane  Sugar 

"    1,025     "       "     "  Domestic  Beet  Sugar 

Paid  over  (mill, 
dollars)  to 

U.S. 
Treasury 

Sugar 
Producers 

Taxes  collected  on  7,400  mill.  lbs. 
of  sugar  @  1  \  c. 

$5-3 
45-6 

$5-2 

\. 

16.6 

8.5 

2.6 
II. 2 

15-4 

^\ 

$50.9 

$59-5 

$111.0 

$TI0.4 

It  appears  that  in  1909-10  the  government  collected  in 
millions  of  dollars  from  the  sugar  consumers.  It  put  about  50 
millions  into  its  own  treasury,  using  that  sum  for  meeting  public 
expenses;  and  handed  over  about  60  millions  to  the  various 
sugar  producers.  The  proportion  going  to  the  sugar  producers 
tended  to  grow  greater  during  the  whole  of  our  period,  —  from 
the  close  of  the  civil  war  until   191 3.      During  the  early  years 

1  Figures  of  this  sort  are  not  so  easy  to  compile  as  one  might  suppose.  They 
must  be  put  together  from  scattered  statements  in  the  Treasury  Department 
Report  on  Commerce  and  Navigation  and  in  the  Statistical  Abstract. 

Domestic  production  is  reckoned  by  seasons,  not  by  fiscal  years,  and  some  adjust- 
ment is  necessary  for  comparison  with  the  imported  (non-domestic)  supply. 

In  any  year  it  will  be  found  that  there  are  slight  discrepancies  between  the 
figures  given  in  the  various  sources.  For  the  present  purpose,  the  discrepancies 
signify  nothing.  The  figures,  which  I  have  intentionally  given  in  round  numbers, 
state  the  outcome  without  any  substantial  deviation  from  statistical  accuracy. 


BEET  SUGAR 


99 


of  the  period,  the  sugar  duty  had  been  mainly  a  revenue  tax. 
By  its  close,  the  characteristic  features  of  a  protective  duty 
had  emerged:  the  treasury  received  less  in  revenue  than  the 
favored  producers  secured  in  largess  or  bounty. 

With  the  passage  of  the  tariff  act  of  1 913,  the  situation  changed. 
The  steady  increase  of  the  domestic  supply,  and  of  that  from 
Cuba  also,  served  to  shut  out  completely  the  full-duty  importa- 
tions; only  sporadic  supplies  came  from  other  than  the  favored 
regions.  The  duty  on  Cuban  sugar,  —  one  cent  a  pound,  —  thus 
became  the  effective  rate.  The  following  account,  made  up  for 
the  year  191 6  on  the  same  plan  as  the  preceding  one  for  1909-10, 

The  United  States  Government  in  Account  with  Sugar  Consumers 

for  the  calendar  year  igi6 


Dr. 

(Mill. 

dollars) 

Taxes    collected    on    8,161 

mill.  lbs.  sugar  @ic $81.6 

Taxes  collected  on  35  mill, 
pounds  full  duty  sugar  @ 


■4 


Cr. 


On       35  miLl.  lbs.  of  full-duty  sugar. .  . 
"    3,73i     "       "    "   Cuban 
"       505  mill.  lbs.  of  Louisiana    sugar. 
"    1,566     «       "    "   U.  S.  beet 
"1,196     ■       ■     "   Hawaiian 
"       880     "       "    "   Porto  Rico 
"       250     "       "    "   Philippine 


Paid  over  (mill, 
dollars)  to 


U.S. 
Treasury 

Sugar 
Producers 

%     .4 

37-3 

$  5-0 

IS- 7 

12.0 

8.8 

2.5 

$38.0 

$44-o 

$82.0 


shows  the  trend.  The  total  sugar  tax  became  less,  in  consequence 
of  the  lower  rate  of  duty ;  but  of  the  total  paid  by  consumers  a 
smaller  proportion  went  to  the  Treasury  as  revenue,  a  larger  pro- 
portion to  the  sugar  producers  as  bonus  or  protection.1 

1  Apparent  discrepancies  in  the  figures  are  due  to  the  omission  of  some  petty 
items,  e.g.  Treasury  receipts  from  molasses  imports. 

On  the  beet  sugar  industry  valuable  information  was  supplied  after  the 
appearance  of  the  first  edition  of  this  book  in  a  Report  on  the  Beet  Sugar  Industry, 
issued  in  191 7  by  the  Federal  Trade  Commission,  at  the  same  time  with  the  report 
from  the  Department  of  Commerce  on  cane  sugar  (see  p.  57,  note),  and  covering 
the  same  year,  —  19 14.  The  data  given  in  this  document  indicated  that  most 
makers  of  beet  sugar  in  the  arid  and  semiarid  regions  could  hold  their  own  even 
if  the  duty  were  removed;  while  those  in  the  less  favorable  regions,  notably  in 
Michigan,  would  eventually  succumb  under  free  trade. 


CHAPTER  VIII 

REFINED   SUGAR  AND   THE   SUGAR  TRUST 

The  sugar  refining  industry  has  always  been  protected  by  duties 
higher  than  those  on  raw  sugar.  In  early  times, —  before  the  civil 
war,  —  one  factor  that  contributed  to  high  duties  on  refined 
sugar  was  the  circumstance  that  it  was  considered  a  luxury. 
Most  persons  used  "  brown  "  sugar;  only  the  rich  used  refined. 
Partly  for  this  reason,  partly  because  of  the  disposition  to  protect 
sugar  refining  like  other  industries,  the  difference  between  the 
rates  on  raw  and  refined,  —  the  so-called  "  differential "  of  recent 
years,  —  was  so  considerable  that  all  refining  was  carried  on 
within  the  country.1  The  imports  were  mainly  in  the  form  of 
raw  sugar.  In  this  regard  the  situation  remained  unchanged 
from  1789  to  the  present  time. 

The  mode  of  assessing  the  sugar  duties  and  of  fixing  the  differ- 
ential has  given  rise  to  legislative  and  administrative  difficulties. 
Until  1883  the  duties  were  graded  according  to  the  "  Dutch 
standard,"  —  the  method  of  grading  universally  used  in  earlier 
times.  Cane  sugar  as  it  comes  from  the  sugar  houses  or  sugar 
mills  of  the  plantations  is  not  pure,  and  is  more  or  less  discolored; 
it  may  contain  anywhere  from  3  per  cent  to  25  per  cent  of  im- 
purities. Under  the  "  Dutch  standard  "  its  sugar  content  is 
supposed  to  be  indicated  by  color.  Dark  or  dirty  sugar  has  low 
numbers;  as  the  sugar  becomes  lighter,  it  is  designated  by  the 
high  numbers.  The  number  16  indicates  approximately  the  line 
of  division  between  raw  sugar  and  refined.     Sugar  up  to  no.  13  is 

1  Thus,  to  give  some  typical  figures,  the  duties  on  sugar  were: 

On  raw  On  refined  Differential 

1789                        1    cent  3        cents                            2      cents 

1802                        21  cents  7  4a        " 

I8l6                             3         "  IO@I2       «  7  to  9       ■ 

1842                        2\     '  6                                           si       ' 

1861  (March)           J      "  2                                         ii       " 

On  some  of  the  early  problems  of  legislation  and  administration,  see  C.  S.  Griffin, 
"The  Taxation  of  Sugar,  1789-1861,"  in  Quarterly  Journal  of  Economics,  xi,  p.  296. 

100 


REFINED  SUGAR  AND   THE  SUGAR  TRUST  IOI 

dark  and  presumably  impure;  sugar  of  no.  i5  is  very  light  gray  in 
color;  number  20  is  white.  Under  the  tariff  acts  before  1883  the 
"  Dutch  standard  "  alone  was  used  in  grading  the  duties;  sugars 
of  low  number  had  lower  duties,  those  of  high  number  higher 
duties.  Serious  embarrassment  ensued,  however,  because  of 
artificial  coloration  of  sugars  having  high  saccharine  content;  and 
in  1883  the  polariscope  test  was  adopted  for  grading  the  sugar 
duties.1  This  optical  test,  —  one  of  the  striking  applications  of 
science  to  industry,  —  determines  the  saccharine  content  of 
sugars  without  regard  to  color  and  with  perfect  accuracy.  It  had 
been  in  familiar  trade  use  for  some  time  before  1883,  and  its 
belated  adoption  by  the  government  is  but  one  of  the  many 
examples  of  the  tendency  of  public  management  of  business  to  lag 
behind  private.  Some  relic  of  the  "  Dutch  standard  "  system, 
however,  remained  in  the  tariff  acts  of  1883  and  subsequent  years, 
in  that  the  dividing  line  between  raw  and  refined  sugar  was  still 
fixed  on  the  old  basis,  that  is,  according  to  color.  All  dark  sugar 
was  dealt  with  as  raw  sugar,  and  was  subjected  to  duties  varying 
according  to  saccharine  content  as  indicated  by  the  polariscope 
test.2    All  white  sugar  was  treated  as  refined  sugar,  and  subjected 

1  In  the  years  preceding  1883,  sugars  having  high  saccharine  content  were  artifi- 
cially colored  dark  in  order  to  bring  them  in  at  a  lower  rate  of  duty.  Long  contests 
in  the  courts  ensued,  the  government  trying  to  collect  higher  duties,  while  the  im- 
porters contended  that  under  the  language  of  the  statute  color  alone,  irrespective  of 
saccharine  content,  settled  the  rate  of  duty.  The  importers  finally  won  their  case; 
hence  the  final  application  of  the  polariscope  tests  in  the  act  of  1883.  On  this 
episode  see  D.  A.  WeUs,  Report  on  the  Assessment  and  Collection  of  Duties  on  Im- 
ported Sugars  (New  York,  1878);  "How  Congress  and  the  Public  deal  with  a 
Great  Revenue  Problem,"  Princeton  Review,  November,  1880. 

2  Thus  in  the  tariff  acts  of  1897  and  1909,  all  sugar  below  16  Dutch  standard 
was  assessed  for  duty  as  raw  sugar,  on  a  scale  graduated  by  the  polariscope  test. 
Sugar  testing  750  (75  per  cent  of  saccharine  content)  paid  95/100  of  a  cent.  For 
each  additional  degree,  the  duty  became  35/1000  of  a  cent  higher.  Hence  sugar 
testing  960  (which  is  the  grade  most  largely  imported)  paid  1.685  cents  per  pound. 
//  there  were  such  a  thing  as  raw  sugar  testing  ioo°,  the  duty  on  it  would  be  1.825 
cents  per  pound.  The  duty  on  refined  sugar, i.e.,  "  all  sugar  above  number  16, 
Dutch  standard,  or  which  has  gone  through  a  process  of  refining  "  was  1.95  cents 
in  1897,  and  1.90  cents  in  1909;  leaving  a  differential  (as  stated  in  the  text)  of 
0.125  cents  in  1897,  and  of  0.075  iQ  1909. 

The  word  "  differential  "  is  sometimes  used  in  discussions  of  the  sugar  situation 
to  designate  not  the  additional  duty  on  refined  sugar,  but  the  difference  in  price 


102  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

to  an  additional  duty,  —  the  so-called  "  differential."  Under 
the  act  of  1883  this  differential,  serving  as  protection  to  the  sugar 
refiner,  was  about  one  cent  a  pound.  In  later  tariff  acts  it  was 
much  reduced,  being 

in  1890,  1/2    cent  per  pound  (0.5      cent) 

1894,  1/8       "       "        "  (0.12s    "   ) 

1897,  1/8       "       "        "  (0.125     "   ) 

1909,3/40     "       "        "  (0.075    "   ) 

The  significance  both  of  the  earlier  high  differential  and  of  its 
later  reduction  can  be  understood  only  in  view  of  the  technical 
and  financial  development  of  the  industry.  The  period  from 
1870  to  1890  saw  two  great  changes,  closely  connected.  Large- 
scale  production  developed  with  surprising  rapidity;  combination 
among  refiners  promptly  ensued.  The  essential  process  of  sugar 
refining  did  not  indeed  undergo  great  changes.  As  before,  re- 
fining was  accomplished  by  passing  the  raw  sugar  through  ground 
boneblack.  But  machinery  was  applied  much  more  effectively; 
the  scale  of  operations  was  enormously  enlarged;  the  capacity  of 
the  individual  establishment  became  immensely  greater.1  In  no 
modern  industry  have  the  economies  of  the  great  establishment 
been  more  pronounced.  A  single  refinery  can  turn  out  daily 
5,000,  10,000  even  15,000  barrels  of  refined  sugar.  Were  it  not 
for  the  limitation  imposed  by  the  expense  of  distributing  the  out- 
put over  a  wide  area,  it  would  seem  that  one  vast  plant  could 
refine  the  sugar  of  the  whole  United  States.  As  it  is,  there  were  in 
1914  but  two  refineries  on  the  Pacific  coast,  three  or  four  on  the 
Gulf  coast,  half-a-dozen  or  thereabouts  on  the  eastern  seaboard; 
and  among  these  were  a  few  older  ones  of  comparatively  small 
size,  and  some  newer  and  larger  ones  that  may  be  truthfully  said 

between  raw  sugar  and  refined.  To  avoid  confusion,  I  shall  use  "  margin  "  to 
designate  this  latter  amount,  reserving  "  differential  "  to  indicate  the  refiner's 
protection  under  the  several  tariff  acts. 

1  An  official  in  a  refining  company  has  given  me  the  following  figures  showing 
the  capacity  of  a  refinery  under  his  charge  (not  one  of  the  largest)  at  the  following 
dates: 

in  1870,     250,000  lbs.  (about     700  barrels)  daily 

1880,     450,000    "("      1,300       "     )     " 

1890,     700,000    "     (     "      2,000        "     )     " 

1900,  1,250,000    "    (     "      3i6oo       "     )     " 


REFINED  SUGAR   AND   THE  SUGAR   TRUST  1 03 

to  illustrate  the  wastes  of  competition.  A  refinery  on  the  modern 
scale  costs  millions  of  dollars;  when  ready,  and  operating  to  full 
capacity,  it  does  its  work  with  extraordinary  economy;  to  get  it 
ready,  however,  in  competition  with  established  rivals,  is  a  for- 
midable task. 

These  would  seem  to  be  conditions  almost  ideally  favorable  for 
cut-throat  competition  and  for  the  eventual  emergence  of  some 
sort  of  combination.  As  they  gradually  developed,  there  came 
in  fact  the  successive  stages  of  the  sharpest  sort  of  competition; 
reduction  in  the  cost  of  refining,  and  in  the  margin  of  price  be- 
tween raw  and  refined  sugar;  struggles  and  failures  for  the 
smaller  refiners,  sustained  profits  and  dominance  for  the  larger 
concerns;  finally  in  1887  the  sugar  trust,  a  "  trust  "  in  the  older 
and  more  accurate  sense  of  the  word.  The  refusal  of  the  courts 
to  sustain  this  first  form  of  combination  led  shortly  (1891)  to  the 
formation,  under  strict  corporate  organization,  of  the  American 
Sugar  Refining  Company.  This  great  combination  remained 
the  conspicuous  figure  in  the  industry,  and  though  no  longer  in 
any  strict  sense  a  trust,  continued  so  to  be  called.  With  the 
year  1887  the  combination  problem  emerged  full-fledged.1 

It  has  already  been  noted  that  under  the  act  of  1883  (from  1883 
to  1890)  the  differential  on  refined  sugar  was  about  one  cent  a 
pound.  This  meant  a  high  rate  of  protection.  The  improve- 
ments in  refining  had  reduced  the  cost  of  converting  the  raw  sugar 
into  refined  to  a  figure  considerably  less  than  the  differential.  It 
seems  to  have  been  brought  down  even  then  to  the  figure  at  which 
it  has  been  maintained  ever  since,  —  not  far  from  f  cent  a 
pound.     The  differential  duty  under  the  act  of  1883,  in  other 

1  For  brevity,  I  shall  hereafter  follow  popular  usage  in  designating  the  American 
Sugar  Refining  Company,  as  "  the  trust." 

On  the  history  of  the  trust,  see  a  monograph  by  Vogt,  "  The  Sugar  Refining 
Industry  "  (University  of  Pennsylvania),  1908;  and  on  the  earlier  phase,  up  to 
1900,  J.  W.  Jenks,  The  Trust  Problem,  pp.  130  seq.  Much  information  is  to  be  got 
from  the  Report  of  the  Industrial  Commission  of  i8g8  on  Trusts  and  Industrial  Com- 
binations (1900) ;  in  the  evidence  before  the  Senate  Committee  of  1894;  in  the  Hear- 
ings before  the  Committee  on  the  Investigation  of  the  American  Sugar  Refining  Co., 
usually  spoken  of  as  the  Hardwick  Committee  (1911-12);  and  in  the  voluminous 
testimony  given  in  the  suit  instituted  by  the  Government  (in  1912-15)  for  the 
dissolution  of  the  trust. 


104         SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

words,  was  much  more  than  ioo  per  cent  upon  the  cost  of  refining. 
It  was  virtually  prohibitory  of  the  importation  of  refined  sugar. 
This  high  protection  was  not  due  to  any  deliberate  intent.  As  in 
so  many  other  cases,  it  was  simply  a  legacy  from  older  days,  en- 
tailing consequences  quite  unexpected  on  the  part  of  the  legisla- 
tors who  had  put  it  on  the  statute  book. 

The  immediate  effect  of  the  prohibitory  duty  unquestionably 
was  to  promote  the  formation  of  the  trust,  and  to  enable  it  during 
its  first  years  to  reap  large  profits.  The  trust  was  formed  in  1887. 
The  price  of  refined  sugar  was  at  once  raised,  —  that  is,  the  margin 
between  the  price  of  refined  sugar  and  raw  sugar.  No  doubt  com- 
petition during  the  years  preceding  had  brought  the  margin  below 
the  line  of  normal  profit;  but  it  was  promptly  raised  above  that 
line.  The  chart  on  page  105  has  been  prepared  to  show  the 
relation  between  the  price  of  raw  and  refined  sugar.  A  glance  at 
it  will  show  that  for  two  years  after  1887  the  margin  was  high, 
and  the  profits  of  refining  were  then  great.  It  is  no  wonder  that 
the  head  of  the  combination,  when  testifying  before  the  Industrial 
Commission  in  1899,  made  the  remark,  destined  to  become  noto- 
rious, "  the  mother  of  all  trusts  is  the  customs  tariff  bill."  1 

The  subsequent  course  of  events  showed,  however,  that  this 
dictum  needed  quab'fication.  One  of  the  unsettled  questions  with 
regard  to  combinations  concerns  the  extent  to  which  they  are  held 
in  check  by  real  or  potential  competition.  The  history  of  com- 
petition in  this  particular  case  has  been  so  often  rehearsed  that 
the  briefest  review  will  here  suffice.  At  a  comparatively  early 
date,  in  1889,  the  trust  became  at  loggerheads  with  the  great 
sugar  refiner  of  the  Pacific  Coast,  Spreckels,  of  whose  peculiar 
position  in  that  region  more  will  be  said  presently.  The  Trust 
established  a  rival  refinery  in  California;  the  Calif ornian,  in  re- 
taliation, built  one  at  Philadelphia.  There  was  also  other  com- 
petition on  the  eastern  seaboard.  As  the  chart  shows,  the  margin 
between  refined  sugar  and  raw,  and  hence  the  profits  of  refining, 

1  Report  of  the  Industrial  Commission  (of  1900),  i,  p.  101.  On  this  earlier  period, 
see  the  excellent  account  in  Jenks,  The  Trust  Problem  (1900),  pp.  133  seq.,  where 
is  also  a  chart  showing  in  much  detail  the  fluctuations  in  the  prices  of  raw  and 
refined  sugar. 


REFINED  SUGAR  AND   THE  SUGAR   TRUST 


105 


were  sharply  reduced  during  this  first  period  of  competition  (1890 
-91).  But  the  warring  factions  soon  united.  Spreckels  was 
taken  into  the  combination  on  favorable  terms.  The  more  con- 
siderable eastern  competitors  were  also  absorbed.     For  five  or  six 


^—^ 

1 

Refiner's  Margin 

— ' 

\ 

TVip  mnrrnn    hptwppn 

raw  Sugar  and  refined 

\ 

s 

\ 

I 

J 

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/ 

\ 

1 

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«r" 

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j 

\ 

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' — - 

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1 

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1 

Chart  I1 

S1.50 
1. 40 
1.30 
1.20 
1.10 
1.00 

.90 

.80 

.70 

.60 

.50 

.40 

.30 

.20 

.10 

1879   '81     '83     '85  "'87     '89     '91      '93     "95     '97     '99    1901    '03     '05     '07     '09     '11      '13     '15 

1  The  cost  of  refining  is  usually  stated  to  be  f  cent  a  pound,  or  62§  cents  per 
cwt.  This  is  "  cost  "  in  the  accountant's  sense;  including  all  direct  and  indirect 
outlays,  but  not  including  anything  for  return  on  the  investment  in  the  way  of 
interest  or  profit.  The  amount  by  which  the  margin  exceeds  this  "  cost  "  is  the 
source  of  profit  for  the  refiner.  The  figure  commonly  given  for  cost  (f  cent)  is, 
of  course,  a  rough  and  approximate  one.  It  is  much  affected  by  the  refinery's 
"running  full":  the  more  complete  and  steady  is  the  utilization  of  the  great 
plant,  the  lower  is  the  cost  per  unit.  I  suspect  that  f  cent  is  a  liberal  estimate 
of  cost  for  a  large  refinery  well  managed  and  utilized  to  full  capacity.  But  it  seems 
to  be  impossible,  under  existing  trade  conditions,  to  run  a  refinery  continuously  to 
its  full  capacity. 

Looking  at  the  figures  given  for  prices  of  raw  and  refined  sugar,  it  will  be  seen 
that  the  margin  varied  from  maxima  of  1.42  in  1882  and  1.26  cents  in  1888  to  a 
minimum  of  .5  cent  in  1899.  The  former  figures  meant  a  very  large  margin  for 
profit;  the  latter  meant  no  profit  at  all.  During  the  later  years  (1902-10)  the  margin 
varied  from  .75  to  .90  cent;  or,  in  round  numbers  it  exceeded  cost,  and  contributed  to 
interest  and  profits,  by  an  amount  varying  from  \  to  -^  cent  per  pound.  I  doubt 
whether  it  could  be  proved  that,  allowing  for  interest  and  "  reasonable  "  business 
profits,  this  brought  a  price  in  excess  of  total  normal  cost.  Compare  what  is  said 
below,  chapter  xii,  p.  210,  on  "  cost." 

The  figures  given  are  averages  for  the  successive  years.  Such  figures  might  be 
misleading,  since  there  might  be  variations  within  each  year,  concealed  in  the 
averages,  that  would  affect  the  significance  of  the  table  and  chart.  But  in  this 
case  more  minute  and  detailed  tabulations  lead  to  no  changes  in  the  results.  A 
chart  showing  the  price  figures  month  by  month  has  been  made  for  me  by  Mr. 
H.  L.  Perrin  of  Boston  University,  who  has  carried  on  an  investigation  of  the  trust's 
history  under  my  guidance,  and  no  deviations  were  found  that  would  modify  the 
conclusions  stated  in  the  text.  I  am  glad  to  acknowledge  my  indebtedness  to 
Mr.  Perrin. 


106        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

years  after  1892,  the  trust  was  again  in  almost  sole  control,  and 
its  profits  again  were  high.  Under  the  act  of  1890,  the  tariff 
differential  on  refined  sugar  was  such  as  to  make  competition  by 
foreign  refiners  impossible,  and  so  sustained  the  position  of  the 
trust.  As  the  chart  shows,  the  refiner's  margin  was  profitably 
high  in  1892  and  1893.  The  tariff  act  of  1894  reduced  the  differ- 
ential (from  \  to  \  cent  a  pound),  and  the  margin,  though  still 
comfortably  high,  became  less  excessive.  The  Trust  was  in 
virtual  control  of  the  domestic  situation  for  several  years  after 
1892,  but  after  1894  was  held  in  check  in  some  degree  by  a  possi- 
bility of  foreign  competition  under  the  lowered  differential  of 
1894.1 

Beginning  with  1897,  however,  a  new  period  of  domestic  compe- 
tition set  in,  and  there  was  a  sharp  decline  in  the  margin  and  in 
the  profits  of  refining.  Competition  ensued  between  the  trust 
and  the  Arbuckles,  —  a  large  coffee  firm  which  refused  to  accept 
the  Trust's  terms  for  sugar  and  proceeded  to  build  a  refinery  of 
its  own.  The  competition  was  so  bitter  that  for  a  year  or  two 
the  profits  of  refining  seem  to  have  entirely  disappeared.  This 
cut-throat  contest  was  followed  by  a  truce.  After  the  opening  of 
the  twentieth  century  the  situation  in  the  sugar  refining  trade 
might  be  not  inaccurately  described  as  one  of  armed  neutrality. 
The  trust  retained  a  strong  position,  yet  not  a  controlling  one. 
The  Arbuckles  remained  as  competitors;  and  on  the  eastern  sea- 
board there  were  other  competitors  also.  The  margin  became 
comparatively  moderate.  The  profits  of  refining  do  not  seem  to 
have  been  excessive. 

That  tariff  protection  did  not  in  itself  have  a  determining  effect 
on  the  gains  of  the  refiners  was  shown  by  the  absence  of  any  visible 
influence  on  these  gains  from  the  Cuban  reciprocity  arrangement. 

1  It  is  not  easy  to  make  out  precisely  what  was  the  situation  of  the  refiner  (i.  e., 
the  trust)  during  the  period  when  the  tariff  act  of  1894  was  in  force.  The  sugar 
duties  of  that  act  were  regarded  as  a  surrender  to  the  trust;  see  my  Tariff  History 
of  the  United  States,  p.  308.  It  has  been  said  that  the  ad  valorem  duty  of  forty  per 
cent  then  imposed  on  raw  sugar  worked  to  its  advantage.  For  some  figures  on 
the  profits  of  refining  under  the  several  tariff  acts  of  1890,  1894,  1897,  see  the 
testimony  of  Mr.  W.  P.  Willett  before  the  Hardwick  Committee  (191 2), 
pp.  3548-3549. 


/ 


REFINED  SUGAR  AND  THE  SUGAR  TRUST  1 07 

The  Cuban  treaty  went  into  effect  in  1903.  It  has  already  been 
shown  *  that  within  a  short  time  it  caused  the  price  of  Cuban 
sugar  to  fall  in  the  United  States,  during  a  considerable  part  of 
each  year;  not  indeed  to  fall  by  the  full  amount  of  the  Cuban  re- 
mission (20  per  cent  of  the  general  duty),  but  by  a  substantial 
part  of  the  remission.  The  refiners,  in  other  words,  were  able  to 
buy  Cuban  raw  sugar  at  a  substantial  reduction  below  the  full- 
duty  price.  The  protection  to  them  as  refiners  was  thereby  vastly 
increased.  For  the  duty  on  refined  sugar  was  not  affected  by  the 
Cuban  treaty;  this  remained  throughout  at  the  full  rate  of  the 
tariffs  of  1897  and  z9°9-  Obviously  the  foreign  refiner  could  not 
compete  with  the  American  refiner  who  got  his  Cuban  sugar  at 
less  than  the  full-duty  price  of  raw  sugar.  Except  during  those 
few  months  of  the  year  in  which  full-duty  sugar  was  imported 
from  Java  and  other  non-favored  regions,  the  American  refiners 
were  in  the  position  of  having  a  protection  that  amounted  virtu- 
ally to  prohibition.2  Yet  the  price  of  refined  sugar  was  not  main- 
tained at  all  at  the  full-duty  rate;  it  followed  in  the  main  the 
oscillations  in  the  (reduced)  price  of  Cuban  raw  sugar. 

Surveying  the  whole  course  of  events,  it  may  be  thus  fairly  said 
that  the  history  of  the  sugar  trust,  so  far  as  its  refining  operations 
are  concerned,  supports  the  view  that  protection,  though  it  may 
stimulate  the  formation  of  a  combination  and  for  a  time  swell  its 
profits,  does  not  enable  monopoly  gains  to  be  maintained  per- 
manently. After  a  few  years  of  high  profits,  competition  has  set 
in.  The  strictly  manufacturing  profit  in  the  long  run  was  kept 
within  competitive  limits. 

One  further  aspect  of  the  case  may  be  disposed  of  at  this  point. 
The  refining  industry,  whether  or  no  it  needed  protection  in  earlier 
days,  ceased  to  need  it  by  the  close  of  the  nineteenth  century. 
The  industry  is  one  in  which  great  plant  and  large-scale  produc- 
tion tell  to  the  utmost.     It  is  of  the  kind  in  which  American  en- 

1  See  p.  77,  above. 

2  The  Cuban  remission  was  not  in  terms  limited  to  raw  sugar;  it  would  have 
applied  to  any  refined  sugar  imported  from  Cuba;  but  in  fact  none  came  thence  to 
the  United  States. 

It  is  this  situation  which  probably  accounted  for  the  indifference  with  which 
the  refiners  acceded  to  the  reduction  of  the  differential  in  the  tariff  act  of  1909. 


108  SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

terprise  finds  a  congenial  field,  and  in  which  this  country  has  a 
comparative  advantage.  The  indications  are  that  refining  is 
done  as  cheaply  in  the  United  States  as  in  foreign  countries,  and 
that  it  does  not  need  the  prop  of  protection.  Even  with  no  pro- 
tection at  all,  —  that  is,  with  no  duty  at  all,  or  with  such  a  duty 
only  on  refined  sugar  as  would  offset  that  on  raw  sugar,  —  the 
industry  would  maintain  itself. 

There  were  other  parts  of  the  trust's  operations,  however, 
which  were  influenced  by  the  tariff.  The  strictly  refining  profit, 
which  alone  has  been  considered  hitherto,  was  supplemented,  for 
a  time  at  least,  by  some  other  sources  of  gain.  These  were  con- 
nected with  the  peculiar  raw  sugar  situation  described  in  the  pre- 
ceding pages. 

Typical  of  these  supplementary  pickings  were  the  extra  profits 
secured  on  Hawaiian  sugar.  It  has  already  been  intimated  that 
although  the  Hawaiian  planters  secured  almost  the  entire  amount 
of  the  remission  of  duty  on  their  sugar,  some  fraction  went  else- 
where.1 Hawaiian  sugar  was  sold  in  the  United  States,  from  the 
beginnings  of  reciprocity  in  1876,  on  the  basis  of  the  New  York 
price  of  raw  sugar.  But  the  planters  never  received  quite  the  full 
New  York  price ;  they  sold  their  sugar  at  that  price  less  a  fraction 
of  a  cent.  The  Hawaiian  sugar  naturally  went  to  San  Francisco, 
the  nearest  port.  There  it  was  sold  at  the  New  York  price,  less 
a  sum  which  roughly  represented  the  difference  between  the  cost 
of  carrying  the  sugar  to  San  Francisco  and  that  of  carrying  it  to 
New  York.  This  arrangement  began  in  the  days  before  the  for- 
mation of  the  trust,  and  was  then  due  to  the  circumstance  that 
on  the  Pacific  Coast  refining  was  in  the  hands  of  monopoly.  The 
same  extraordinary  growth  of  large-scale  operations  had  taken 
place  in  California  as  in  the  eastern  region,  and  had  led  to  the 
disappearance  of  all  refineries  except  one  (that  of  the  well-known 
Spreckels).  If  there  had  been  effective  competition  among  re- 
finers in  California,  the  Hawaiian  planters  doubtless  would  have 
secured  the  full  benefit  of  the  remission  of  duty  on  their  sugar, 
without  the  loss  even  of  this  small  slice.  But  as  there  was  but 
one  purchaser  for  their  sugar  in  California,  he  could  confront 

1  See  above,  p.  60. 


REFINED  SUGAR  AND   THE  SUGAR  TRUST  109 

them  with  the  alternative  of  either  accepting  from  him  a  slightly- 
lower  price  or  transporting  their  sugar  to  the  more  distant  market 
of  New  York.  Hence  the  arrangement  by  which  Hawaiian 
sugars  were  regularly  sold  in  California  at  a  fraction  below  the 
New  York  price.  Needless  to  say,  no  benefit  arose  to  the  con- 
sumer from  this  reduction.  The  Californian  refiner,  so  far  from 
selling  his  product  at  a  lower  price  than  that  of  the  east,  sold  it 
on  the  Pacific  coast  at  a  price  higher  by  the  cost  of  transportation 
from  the  eastern  refiners  across  the  country.  The  refiner  pock- 
eted an  extra  profit  in  both  directions.  He  bought  the  raw  sugar  at 
a  price  below  the  New  York  quotation,  and  sold  his  refined  sugar 
at  a  price  above  the  New  York  quotation.  It  is  not  surprising 
that  one  of  the  great  fortunes  of  the  country  was  accumulated. 

As  has  already  been  noted,  a  struggle  set  in  between  the  Cali- 
fornian refiner  and  the  trust  in  1889,  and  came  to  an  end  in  1892; 
and  after  that  time  the  trust,  associated  with  Spreckels,  domi- 
nated the  field  on  the  Pacific  Coast  even  more  completely  than 
elsewhere.1  The  arrangement  with  the  Hawaiian  planters  re- 
mained as  before.  They  sold  their  sugar  at  a  fraction  less  than 
the  New  York  price.  From  time  to  time  there  were  variations 
in  the  terms  of  the  contracts  between  them  and  the  refiners.  At 
one  period  the  trust  became  what  is  described  in  the  pleasant 
phraseology  of  business  as  "  hoggish,"  and  insisted  upon  too  great 
a  reduction  from  the  New  York  price.  The  Hawaiian  planters 
thereupon  threatened  to  build  a  refinery  of  their  own  in  California 
and  in  fact  proceeded  to  do  so;  though  before  the  stage  of  real 
competition  was  reached,  a  truce  between  the  contestants  seems 
to  have  been  patched  up.2 

1  In  the  holding  company  (The  Western  Sugar  Refining  Company)  which  took 
over  the  California  refinery  operated  by  the  trust  and  the  Spreckels  refinery,  each 
party  held  one-half  of  the  stock.  The  refinery  which  had  been  operated  by  the 
trust  was  immediately  closed,  and  was  ultimately  destroyed  by  the  San  Francisco 
earthquake.  The  Spreckels  plant  sufficed  to  refine  all  the  sugar  consumed  on  the 
coast.     See  Hardwick  Committee  Hearings  (191 1),  pp.  927-932. 

In  191 1  the  trust  sold  its  stock  in  the  Western  Sugar  Refining  Co.  (to  the  Spreck- 
els interests) ;  this  being  part  of  the  policy  of  conformity  to  law  adopted  by  the 
later  managers. 

2  In  the  earlier  period,  until  about  1890,  the  Hawaiian  planters  were  not  united, 
and  accepted  varying  prices  for  their  sugar.    Later  they  combined,  and  made 


IIO         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

To  many  persons  the  process  by  which  the  Californian  refiner, 
—  at  first  Spreckels,  later  the  trust,  —  secured  a  slice  of  the  prof- 
its of  the  Hawaiian  planters  will  seem  iniquitous.  To  the  dis- 
passionate observer,  it  will  appear  simply  as  a  quarrel  over  booty, 
in  which  neither  party  could  claim  virtue  or  be  deemed  guilty  of 
sin.  So  far  as  the  consumers  of  sugar  were  concerned,  it  made  no 
difference  how  the  contestants  haggled  over  the  division  of  the 
spoil.  No  doubt  the  refiners  for  a  while  secured  substantial  pick- 
ings; but  had  they  not  done  so,  the  Hawaiian  planters  would 
simply  have  secured  so  much  more. 

An  extra  profit  of  the  same  sort  was  secured  by  the  trust  in  its 
purchases  of  Louisiana  sugar.  Here  too  the  commanding  posi- 
tion of  the  refiner  enabled  the  purchase  of  raw  sugar  to  be  made  at 
prices  below  those  which  would  have  prevailed  under  a  competi- 
tive regime.  The  trust  was  virtually  the  sole  purchaser  of  raw 
sugar  in  Louisiana;  for  here  also  the  march  of  large-scale  produc- 
tion eliminated  the  small  refiner,  and  left  the  one  huge  concern 
alone  in  the  field.  The  planter  of  Louisiana,  b'ke  the  Hawaiian 
planter,  was  confronted  by  the  alternative  of  paying  for  the  trans- 
portation of  the  sugar  to  a  more  or  less  competitive  market  in 
New  York,  or  of  selling  it  to  the  trust  in  Louisiana  at  a  price 
slightly  below  that  of  New  York.  It  was  simplest  for  him  to 
accept  the  second  alternative.  Louisiana  raw  sugar  was  regu- 
larly sold  at  a  fraction  below  the  New  York  price.  The  refined 
sugar,  on  the  other  hand,  was  disposed  of  in  the  Mississippi  Valley 
with  no  corresponding  reduction.     Here  again  the  operations  of 

contracts  for  a  year  or  series  of  years  with  the  trust,  stipulating  that  all  planters 
should  get  the  same  price,  —  a  fraction  below  the  New  York  price.  In  191 2  the 
reduction  from  the  New  York  price  was  \  cent  for  sugar  delivered  at  San  Francisco, 
^  cent  for  sugar  delivered  at  Atlantic  ports.  The  trust  contended  that  its 
obligation  to  take  at  once  all  the  Hawaiian  sugar  offered  made  some  such  reduction 
reasonable;  and  the  willingness  of  the  Hawaiians  to  enter  on  the  arrangement  for 
sugar  delivered  at  the  eastern  ports  (ts  cent  reduction)  doubtless  rests  on  this 
circumstance.  It  is  not  clear  that  during  the  later  years  of  the  period  the  arrange- 
ment was  such  that  the  Hawaiian  planters  had  ground  for  complaint.  See  on  this 
subject,  the  statement  of  Willett,  in  the  record  of  the  suit  of  the  U.  S.  Gov't  v. 
Amer.  Sug.  Refining  Co.,  i,  p.  83  (191 2);  testimony  before  the  Hardwick  Com- 
mittee (191 1),  pp.  89-90,  and  3610;  and  the  pamphlet  by  F.  C.  Lowry,  Our 
High  Tariff  on  Sugar  (published  in  various  editions,  1909-1912;  see  the  edition  of 
1909,  p.  4). 


REFINED  SUGAR  AND  THE  SUGAR  TRUST  1 1 1 

the  trust  were  regarded  by  staunch  protectionists  as  thoroughly 
iniquitous;  and  so  needless  to  say,  they  were  regarded  by  the 
Louisiana  planters.  And  no  doubt  there  was  one  point  of  differ- 
ence between  the  case  of  Louisiana  and  that  of  the  Hawaiian 
planters:  the  planters  of  the  former  could  plead  that  the  trust 
deprived  them  of  some  part  of  the  protection  which  Congress  in- 
tended to  give.  The  bonus  to  the  Hawaiians  arose  through  no 
deliberate  intent;  but  Louisiana  sugar  was  doubtless  meant  to 
have  protection,  through  an  enhancement  of  the  price  of  raw 
sugar,  by  the  full  amount  of  the  duty.  A  fraction  of  this  pro- 
tection was  intercepted  by  the  trust.  And  this  fraction,  like  the 
other  gains,  tended  to  dwindle  during  the  later  years,  as  competi- 
tion from  various  quarters  deprived  the  trust  of  its  position  of 
control.1 

It  was  often  intimated  that  the  trust  secured  in  other  direc- 
tions additional  profits.  Thus  it  was  alleged  that  extra  gains 
were  made  through  ownership  of  sugar  lands  and  production  of 
raw  sugar  in  Cuba,  Porto  Rico;  even  in  the  Philippines.  But 
the  combination  seems  to  have  entered  on  no  operations  of  this 
sort.  Individuals  owning  shares  in  it  no  doubt  were  also  inves- 
tors in  sugar  plantations ;  but  it  seems  to  be  strictly  true  that  in 
so  doing  they  acted  simply  as  individuals.  Americans  were  not 
slow  to  see  the  opportunities  for  profit  created  by  the  various 
exemptions  from  the  sugar  duty,  and  they  took  advantage  of 
them  in  Cuba  and  in  Porto  Rico,  as  they  did  in  Hawaii.2  In  view 
of  the  popular  hatred  of  trusts  and  trust  methods,  and  the  special 
obloquy  under  which  the  sugar  combination  fell,  it  is  not  sur- 

1  Whether  the  Louisiana  planters  were  "  oppressed  "  by  the  trust  during  the 
later  years  is  not  easy  to  make  out.  Their  spokesmen  naturally  thought  so;  see 
the  testimony  before  the  Hardwick  committee  (Hardwick  Report,  p.  1841).  The 
representatives  of  the  trust  pointed  out  (ibid.,  p.  133)  that  they  engaged  to  take  the 
whole  amount  offered  by  any  planter,  at  the  stipulated  reduction  from  the  New 
York  price,  and  to  hold  it  and  assume  the  risk  of  depreciation;  all  of  which  served 
to  make  the  arrangement  a  reasonable  one.  See  also  the  testimony  of  Mr.  Atkins 
in  the  suit  of  U.  S.  v.  Am.  Sug.  Ref.  Co.,  Transcript  of  Record,  p.  6318.  —  It  must 
be  remembered  that  during  the  later  period  the  price  of  refined  sugar  in  the  Mis- 
sissippi valley  could  no  longer  be  kept  up,  being  subject  to  the  competition  of  other 
refiners  and  also  to  that  of  the  beet-sugar  makers  of  the  west. 

2  Cf.  p.  60,  supra. 


112         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

prising  that  anything  unwelcome  or  objectionable  in  the  situation 
should  be  fastened  on  it,  and  that  there  should  be  suspicion  of 
activity  on  its  part  in  the  sugar  growing  dependencies.  Coolly 
considered,  however,  all  this  is  seen  to  have  nothing  to  do  with 
the  refining  situation  or  the  trust.  It  made  no  difference  to  the 
consumer  what  sort  of  plantation  owner  in  Hawaii  or  Porto  Rico, 

—  native  or  American,  trust  stockholder  or  unaffiliated  planter, 

—  was  benefited  by  the  sugar  tax.  Even  if  the  trust  had  owned 
all  the  plantations,  the  causes  of  its  profit  from  raw  sugar  would 
have  been  distinct  from  those  of  its  profit  on  refining.  As  it  hap- 
pened, the  two  problems  were  distinct  not  only  in  their  economic 
significance  but  as  regards  the  persons  involved.  The  trust 
itself  owned  no  sugar  lands  and  made  no  raw  sugar;  and  such  of 
its  shareholders  as  invested  in  plantations  played  no  dominant  or 
even  considerable  part  in  the  raw  sugar  situation. 

A  different  phase  of  the  trust's  activity,  and  one  which  again 
was  connected  more  with  the  duty  on  raw  sugar  than  with 
the  differential  on  refined,  appeared  in  its  endeavor  to  control  the 
beet-sugar  factories.  The  astute  and  unscrupulous  head  of  the 
combination  seems  to  have  concluded,  about  1900,  that  beet- 
sugar  production  would  be  profitable  so  long  as  the  duty  on  sugar 
remained  high;  that  the  duty  in  fact  was  likely  to  remain  high; 
and  that  the  trust  might  secure  a  share  of  the  beet-sugar  profits  as 
well  as  those  from  buying  and  refining  cane  sugar. 

Accordingly  large  purchases  were  made  of  shares  in  various 
beet-sugar  companies,  from  California  to  Michigan;  and  addi- 
tional factories  were  erected  by  subsidiary  companies.  Here 
again  the  popular  view  was  that  the  transactions  were  particu- 
larly objectionable  because  undertaken  by  a  trust.  It  is  prob- 
ably true  that  the  prices  of  refined  sugar  in  the  Rocky  Mountain 
and  Pacific  regions  were  stiffened;  since  it  was  here  that  beet 
sugar  was  most  largely  produced,  and  here  also  that  the  combina- 
tion profited  most  from  a  high  margin  on  its  refined  sugar.  In  the 
main,  however,  it  made  little  difference  to  the  consumer  whether 
the  beet-sugar  enterprises  were  owned  by  the  trust  or  by  "  inde- 
pendents." Each  benefited  to  the  full  by  the  import  duty  on 
raw  sugar;  and  each  based  the  price  for  refined  sugar  on  the  New 


REFINED  SUGAR  AND   THE  SUGAR   TRUST  113 

York  quotation.  Nor  was  it  of  consequence  to  the  farmer  who 
sold  the  beets  to  the  factories:  he  received  the  same  price  from 
both,  and  was  suspicious  of  oppressive  dealings  by  both,  though 
doubtless  with  an  added  tinge  of  suspicion  when  aware  of  selling 
to  a  trust-controlled  factory.  The  manufacture  of  beet  sugar 
was  at  the  least  as  well  managed  by  the  combination;  it  seems  to 
have  been  better  managed.  So  far  as  I  am  able  to  judge,  com- 
bination in  this  case  conduced  to  industrial  efficiency.  In  the 
selection  of  seed,  the  conduct  of  agricultural  experiments,  the 
instruction  of  farmers,  the  agents  of  the  trust  were  active  and 
capable.  Factory  operations  proper  were  also  carried  on  at  least 
as  well  as  by  independent  makers.  All  this,  however,  had  but 
little  connection  with  tariff  problems.  These  remained  essen- 
tially the  same,  whoever  owned  and  managed  the  beet-sugar 
enterprises.  What  might  have  been  the  consequences  of  control 
of  beet  sugar  by  the  trust,  if  extended  to  the  full  and  continued 
for  a  long  time,  is  no  easy  problem.  But  the  enforcement  of  the 
Sherman  law,  and  a  change  in  the  personnel  of  the  trust's  man- 
agement, led  about  19 10  to  a  policy  of  gradually  divesting  itself 
of  the  beet-sugar  properties  and  investments.  The  same  policy, 
of  giving  up  the  various  arrangements  for  combination  and  con- 
trol, was  followed  in  other  directions.  The  episodes  described  in 
the  preceding  pages  belong  to  the  history  of  the  past. 

It  is  obvious  that  the  differential  on  refined  sugar  and  the  possi- 
ble gains  of  the  refining  combination  were  quantitatively  of 
vastly  less  importance  than  the  duty  on  raw  sugar.  The  latter 
meant  a  tax,  in  the  form  of  higher  prices  of  sugar,  of  a  hundred 
millions  a  year  or  more;  the  former  could  make  a  difference  at  the 
most  of  a  few  millions.  The  effective  duty  on  raw  sugar  I  have 
reckoned  at  i\  cents  a  pound.  The  differential  on  refined, 
after  1894  was  only  |  cent  a  pound.  The  utmost  additional  profit 
made  possible  (not  necessarily  gathered  in)  by  the  trust  because 
of  the  tariff  was  a  matter  of  a  small  fraction  of  a  cent,  —  perhaps 
■£q  cent  or  at  most  i.  In  the  popular  mind,  the  entire  sugar 
duty  was  usually  associated  with  trust  control  and  trust  robbery. 
Yet  this  part  of  it,  —  the  differential  on  refined,  —  bears  chiefly 
on  another  set  of  problems,  —  the  significance  of  a  very  small 


114         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

fraction  of  profit  on  a  huge  volume  of  transactions,  and  the 
possible  gain  to  be  secured  by  something  much  short  of  iron-clad 
monopoly.  An  additional  profit  of  xV  cent  per  pound  meant 
several  millions  a  year  for  the  refining  combination,  but  was  of 
negligible  effect  on  the  price  of  sugar  for  the  retail  purchaser.1 

1  In  this  sketch  of  the  Sugar  Trust,  I  have  confined  myself  to  those  operations 
which  had  to  do  directly  with  the  protective  tariff.  The  furious  speculation  in 
sugar  stock  and  its  manipulation  by  insiders,  the  political  corruption  or  semi- 
corruption  practised  by  the  early  managers,  the  trust's  methods  of  competition, 
the  much-discussed  episode  of  the  capture  of  the  Philadelphia  (Segal)  refinery,  — 
all  belong  to  the  history  of  the  trust  problem,  in  which  this  particular  combination 
could  be  the  subject  of  a  veritably  sensational  chapter.  The  frauds  on  the  revenue 
through  underweighing  are  also  outside  the  scope  of  the  present  volume.  They 
are  connected  with  the  administrative  side  of  customs  duties,  and  with  the  unsavory 
political  conditions  of  the  closing  years  of  the  nineteenth  century.  On  the  death 
in  1907  of  H.  O.  Havemeyer,  who  had  maintained  through  his  life  a  curious  despotic 
control  of  the  trust,  its  management  came  into  other  and  better  hands,  and  a 
new  phase  began. 


PART   III 
IRON   AND   STEEL 


CHAPTER  IX 

A  SURVEY  OF  GROWTH 

The  present  Part  will  consider  the  iron  and  steel  industry,  its 
extraordinary  advance  since  1870,  and  the  influence  of  the  tariff 
on  that  growth.  No  phase  of  the  country's  economic  develop- 
ment shows  changes  so  striking.  None  raises  questions  more 
difficult  to  answer  concerning  the  effects  of  protective  duties.  To 
understand  the  complexity  of  the  factors  which  have  been  at 
work,  and  the  nature  of  the  special  problems  that  arise,  a  survey 
must  first  be  made  of  the  growth  of  the  industry  and  of  the  vari- 
ous influences  which  have  affected  it. 

In  1870  Great  Britain  was  still  the  world's  commanding  pro- 
ducer of  iron  and  steel.  Notwithstanding  half  a  century  or  more 
of  almost  continuous  protection,  the  United  States  held  but  a 
distant  second  place.  The  output  of  pig-iron  in  the  old  country 
in  1870  was  very  nearly  six  millions  of  tons;  that  in  the  new  coun- 
try was  but  little  over  a  million  and  a  half.  But,  as  the  appended 
figures  show,1  the  United  States  gained  rapidly  and  surely  on  its 
rival.  During  each  of  the  three  decades  from  i860  to  1890,  the 
annual  production  of  American  pig-iron  doubled.  The  figure  for 
1870  was  twice  that  of  i860;  1880  doubled  1870;  and  1890  again 
doubled  1880.     The  British  output  increased  considerably  during 

the  same  period,  but  could  not  meet  the  pace  of  its  astounding 

\» 

1  The  figures  of  production,  at  quinquennial  intervals,  are  (in  1,000  tons  of 

2,240  lbs.): 

Great  United 

Britain  States  Germany 

i860  545 

1865  ....  988 

1870  5,963  1,665  i,39i 

1875  6,365  2,024  2.029 

1880  7,749  3,835  2,729 

1885  7.41S  4.044  3.687 

1890  7,904  9,203  4.658 

189S  7.703  9.446  5,464 

1900  8,960  13.789  8,384 

1905  9,608  22,992  10,700 

191°  10,012  27,304  14.S56 

117 


Il8         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

rival.  By  1890  the  United  States  passed  Great  Britain  and 
established  her  position  as  the  leading  iron  making  country  of  the 
world.  In  the  decade  from  1890  to  1900  the  United  States  failed 
to  maintain  the  remarkable  geometric  progression;  yet  the  out- 
put of  1900  was  again  doubled  in  19 10.  Germany  alone  showed 
an  advance  at  all  comparable;  Great  Britain  did  no  more  than 
maintain  a  steady  plodding  pace.  In  1910  the  United  States 
production  of  pig-iron  exceeded  twenty-seven  million  of  tons,  a 
total  larger  than  that  of  Great  Britain  and  Germany  combined, 
and  nearly  twenty  times  as  large  as  the  American  product  of  forty 
years  previous.  If,  as  the  extreme  protectionists  contend,  the 
growth  of  domestic  industry  is  in  itself  proof  of  the  success  of 
their  policy,  a  degree  of  success  was  attained  in  this  case  that 
could  admit  of  no  cavil. 

This  enormous  increase,  however,  was  by  no  means  evenly  dis- 
tributed over  the  United  States.  Within  the  country  a  revolu- 
tion took  place,  which  was  part  and  parcel  of  the  changed  relation 
to  other  countries,  and  which  must  be  followed  before  the  new 
situation  can  be  understood. 

The  first  great  impulse  to  the  production  of  crude  iron  on  a 
large  scale  came  in  the  United  States  with  the  successful  use  of 
anthracite  coal  as  fuel.  During  the  twenty  years  preceding  the 
civil  war  (1840-60)  the  site  of  the  industry  and  its  growth  were 
governed  by  this  fuel.1  Hence  eastern  Pennsylvania  was  the 
main  producing  district.  The  supplies  of  ore  near  this  region 
were  smelted  with  its  anthracite  coal,  and  Philadelphia  was  the 
central  market.  Proximity  to  the  seaboard  made  foreign  compe- 
tition easy,  except  so  far  as  it  was  hampered  by  the  tariff  duties; 
and  the  very  existence  of  the  iron  industry  was  felt  to  depend  on 
the  maintenance  of  protection.  For  some  time  after  the  close  of 
the  civil  war  this  dominant  position  of  anthracite  iron  was  main- 
tained. In  1872,  when  the  systematic  collection  of  detailed 
statistics  began,  out  of  a  total  production  of  2,500,000  tons,  one- 
half  was  smelted  with  anthracite  coal,  a  third  with  bituminous 
coal  or  coke,  the  remainder  with  wood  (charcoal).     The  use  of 

1  For  an  account  of  the  industry  during  this  period  I  refer  to  my  Tariff  History 
of  the  United  States,  pp.  123-125. 


A  SURVEY  OF  GROWTH  119 

soft  coal,  which  had  begun  before  i860,  became  rapidly  greater. 
Already  in  1872  it  was  important;  and  from  year  to  year  it  grew. 
In  the  periodic  oscillations  between  activity  and  depression  which 
mark  the  iron  trade  more  than  any  other  industry,  anthracite  iron 
shrank  in  the  slack  periods,  and  barely  regained  its  own  in  the 
succeeding  periods  of  expansion.  Bituminous  or  coke  iron,  on 
the  other  hand,  held  its  own  during  the  hard  times,  and  advanced 
by  leaps  and  bounds  with  each  revival  of  activity.1  In  1875  for 
the  first  time  its  output  exceeded  that  of  the  rival  eastern  fuel; 
after  that  date  the  huge  advance  in  the  iron  product  of  the  United 
States  was  dependent  on  the  use  of  coke.  Indeed,  the  use  of 
anthracite  alone  began  to  shrink  at  a  comparatively  early  date. 
It  soon  ceased  to  be  used  on  any  large  scale  as  the  sole  fuel,  coke 
being  mixed  with  it  for  use  in  the  blast-furnace.  What  is  classed 
as  "  anthracite  iron  "  is  smelted  with  a  mixture  of  coke  and  hard 
coal;  and  even  with  the  aid  of  the  coke,  this  means  of  reducing 
the  ore  came  to  be  of  less  and  less  importance.  Anthracite  coal 
was  completely  displaced  as  an  iron  making  fuel.2 

1  During  the  earlier  years,  bituminous  coal  was  much  used  in  the  blast-furnaces 
without  being  first  coked.  But  soon  this  crude  procedure  was  given  up,  and  the 
coal  was  used  in  the  form  of  coke. 

2  The  production  of  pig-iron  by  fuel  at  quinquennial  intervals  is  given  below. 
By  way  of  illustrating  the  trend  over  a  long  period,  the  year  1855  has  been  taken 
as  the  starting-point.     The  figures,  as  in  the  previous  table,  indicate  thousands  of 

gross  tons: 

Pig-Iron  smelted  with 

f \ 

Anthracite  Bituminous            Charcoal 

1855  34i  56                      3°3 

i860 464  io9         248 

1865  428  169         234 

1870 830  5°8         326 

1875  811  846         367 

1880 1,614  1,741         480 

, — ^ 

Anthracite  Anthracite 

alone  and  Coke 

1885  250  1,050  2,389  357 

1890 249  1,937  6,388  628 

1895  56  1,214  7.9SO  225 

1900 40  1,677  n,727  384 

1905 1,674  20,965  3S2 

1910 20  629  26,528  396 

Charcoal  iron  has  qualities  that  make  it  advantageous  for  certain  uses,  and  hence 
it  continues  to  be  produced  in  small  quantities. 


120         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

This  change  is  easy  of  explanation.  It  was  the  inevitable 
result  of  the  greater  plenty  and  effectiveness  of  coke;  and  it  was 
powerfully  promoted  by  the  rapid  development  of  the  United 
States  west  of  the  Appalachian  chain,  and  the  nearness  of  the 
coke  region  to  this  growing  market.  Anthracite,  at  best,  is  an 
obdurate  fuel.  At  the  same  time  its  strictly  limited  supply,  and 
the  cleanliness  and  freedom  from  smoke  which  make  it  an  ideal 
domestic  fuel,  maintained  its  price  at  a  comparatively  high  level. 
On  the  other  hand,  the  vast  supplies  of  bituminous  coal  and  the 
feverish  competition  in  opening  coal  lands  and  marketing  their 
product  caused  an  almost  uninterrupted  fall  in  its  price.  Coke 
proved,  ton  for  ton,  a  better  fuel  than  anthracite;  and  the  sup- 
plies of  bituminous  coal  available  for  coking  proved  almost 
limitless. 

Pittsburgh,  whose  destiny  as  a  great  iron  center  was  perceived 
long  ago,  is  situated  in  the  heart  of  the  region  where  coking  coal  is 
plentiful.  To  this  point  the  iron  industry  converged,  attracted 
first  by  cheap  fuel,  and  soon  by  other  geographical  advantages 
of  the  region,  —  its  easy  access  to  the  growing  western  country, 
and  the  added  opportunities  of  securing  super-abundant  quanti- 
ties of  the  best  ore.  Pennsylvania  has  remained  the  greatest  iron- 
producing  state  in  the  Union;  but  since  1880  it  has  been  western 
Pennsylvania,  and  no  longer  eastern,  which  has  secured  to  the 
state  its  leading  position.  After  1890  this  district  alone  yielded 
steadily  forty  per  cent  of  the  enormous  iron  product  in  the  coun- 
try; and  it  is  here,  and  in  the  other  western  districts  in  which  the 
same  industrial  forces  have  been  at  work,  that  we  have  to  study 
the  conditions  on  which  the  growth  of  the  iron  industry  depended. 

The  westward  movement  was  determined  not  only  by  the  geo- 
graphical distribution  of  the  fuel.  It  was  no  less  affected  by  the 
distribution  of  the  ore  supply;  and  the  effect  of  this  in  turn  rested 
for  many  years  on  the  revolution  wrought  in  the  iron  trade  by  the 
Bessemer  process. 

The  first  inventions  which  made  iron  plentiful  were  Cort's 
processes  for  puddling  and  rolling.  Through  three-quarters  of 
the  nineteenth  century  this  was  the  mode  in  which  the  world  got 


A  SURVEY  OF  GROWTH  121 

its  supply  of  the  metal  in  tough  form,  usable  where  heavy  strain 
must  come  on  it.  The  processes  involved  at  once  a  considerable 
plant,  complex  machinery,  and  strenuous  exertion  by  skilled  and 
powerful  laborers,  —  conditions  which  during  this  period  pro- 
moted the  supremacy  of  the  British  iron  trade.  In  the  decade 
1860-70  the  process  devised  by  Sir  Henry  Bessemer,  to  which  his 
name  attaches,  began  a  second  revolution  in  the  iron  trade. 
That  process  involved  a  still  larger  plant  and  still  more  elaborate 
machinery;  and  it  applied  machinery  more  fully  to  the  elimina- 
tion and  subsequent  replacing  of  the  carbon  on  which  the  tough- 
ness of  the  iron  depends.  By  the  new  methods  the  production  of 
mild  steel  —  that  is,  tough  iron  —  became  possible  on  a  vastly 
greater  scale.  Bessemer  steel  displaced  puddled  iron  in  most  of 
its  uses.  Not  only  this:  the  cheap  and  abundant  supply,  be- 
sides filling  needs  previously  existing,  made  possible  a  much 
greater  use  of  iron  and  steel  for  plant,  machinery,  durable  instru- 
ments of  all  sorts.  One  of  the  first  applications  of  the  method 
was  to  rails,  where  the  elastic  and  impact-sustaining  steel  enabled 
railway  engines  and  cars  to  be  doubled  and  quadrupled  in  size, 
and  to  become  more  efficient  in  even  greater  ratio.  Gradually 
and  steadily,  new  and  wider  uses  were  found  for  the  cheap  steel. 
From  great  ships  down  to  the  smallest  nails,  almost  every  instru- 
ment became  cheaper  and  better.  Wood  was  supplanted  by 
steel  for  a  variety  of  uses,  and  the  slow-growing  and  easily  ex- 
hausted stores  of  timber  were  re-enforced  by  the  well-nigh  limit- 
less deposits  of  iron  ore  in  the  earth's  crust.  A  new  domain  in 
nature's  forces  was  opened  to  man. 

But  the  Bessemer  process  depended  for  its  availability  on 
special  kinds  of  ore  and  pig-iron,  —  such  as  are  nearly  free  from 
certain  admixtures  and  especially  from  phosphorus.  Ores 
adapted  to  it  hence  became  doubly  valuable,  and  the  accessible 
parts  of  the  earth  were  scoured  to  find  them.  The  deposits  of 
Great  Britain  in  Cumberland  and  Lancashire  contained  impor- 
tant supplies,  yet  not  in  quantity  adequate  to  the  new  demand; 
and  the  Spanish  fields  of  Bilboa,  on  the  Bay  of  Biscay,  became  an 
indispensable  supplement  for  the  British  iron  masters.  In  the 
United  States,  also,  some  of  the  sources  previously  used  in  the 


122         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

region  east  of  the  Appalachian  chain  proved  to  be  available,  — 
such  as  the  famed  deposits,  once  unique  in  their  ease  of  working, 
in  the  Cornwall  hills  of  eastern  Pennsylvania.  But  the  greater 
part  of  the  eastern  ores  were  too  highly  charged  with  phosphorus, 
or  for  other  reasons  unavailable.  Here,  as  in  Great  Britain,  a 
distant  source  of  supply  was  turned  to.  The  Lake  Superior  iron 
region,  long  known  to  explorers  and  geologists,  suddenly  sprang 
into  commanding  place.  Here  were  abundant  and  super-abun- 
dant supplies  of  rich  and  properly  constituted  ore.  These  and  the 
equally  abundant  coal  of  Pennsylvania  were  brought  together, 
the  iron  made  from  them  was  converted  into  steel  by  the  Besse- 
mer process;  and  thus  became  possible  the  astounding  growth  in 
the  production  of  iron  and  steel  in  the  United  States. 

The  iron  mines  of  the  Lake  Superior  region  stretch  in  widely 
separated  fields  along  the  lake,  from  the  middle  of  its  southern 
shore  to  its  farthest  northwestern  end.  At  the  extreme  eastern 
end  is  the  Menominee  iron  field,  usually  described  in  connection 
with  the  other  Lake  Superior  fields,  yet  differing  from  them  in  im- 
portant respects.  The  ore  of  the  Menominee  district  is  easily 
mined;  and  it  is  easily  shipped,  finding  an  outlet  by  the  port  of 
Escanaba  on  Lake  Michigan,  and  thus  traversing  a  much  shorter 
journey  to  its  eastern  markets  than  that  from  the  Lake  Superior 
mines  proper.  But  it  is  usually  of  non-Bessemer  quality,  and 
hence  played  no  considerable  part  in  the  most  characteristic 
effects  of  the  new  developments.  The  great  Bessemer  ore  fields 
of  Lake  Superior  are  four  in  number:  in  geographical  order  from 
east  to  west,  the  Marquette,  the  Gogebic,  and  the  neighboring 
Vermilion  and  Mesabi.  As  it  happens,  the  geographical  order 
has  been  also,  in  the  main,  the  order  of  exploitation.  The  eastern- 
most, the  Marquette,  rinding  its  outlet  by  the  port  of  that  name, 
was  the  first  to  be  worked  on  a  great  scale.  Even  before  the 
civil  war,  mining  and  smelting  had  begun;  and,  as  the  Bessemer 
process  was  more  and  more  largely  used,  especially  after  1873,  ft 
was  exploited  on  a  larger  and  larger  scale.  Here  began  the  dig- 
ging of  Bessemer  ore  on  a  great  scale,  and  its  transportation  to  a 
great  distance.  After  a  considerable  interval  the  second  field,  the 
Gogebic,  began  to  be  worked,  in  1884.     Lying  some  two  hundred 


A   SURVEY  OF  GROWTH  1 23 

miles  further  west,  along  the  boundary  line  between  Wisconsin 
and  Michigan,  and  finding  its  outlet  by  Ashland,  on  the  south- 
ern shore  of  Lake  Superior,  here  was  found  perhaps  the  richest 
and  purest  Bessemer  ore.  At  about  the  same  time,  in  1884,  began 
the  development  of  the  most  distant  of  the  fields,  the  Vermilion, 
lying  to  the  north  of  the  extreme  end  of  Lake  Superior,  in  the 
state  of  Minnesota,  close  to  the  Canada  frontier.  Here,  too, 
were  great  stores  of  rich  Bessemer  ore,  shipped  by  the  port  of 
Two  Harbors,  on  the  northern  shore  of  the  lake. 

In  all  these  fields  the  ore  was  secured  by  what  we  commonly 
think  of  as  "  mining,"  —  by  digging  far  into  the  earth,  and  bring- 
ing the  material  up  from  a  greater  or  less  depth.  But  the  latest 
and  now  the  most  important  of  the  fields  gave  opportunity  for  the 
simplest  and  cheapest  form  of  mining.  Great  bodies  of  ore  are 
lying  close  under  the  ground,  and,  when  once  the  surface  glacial 
drift  has  been  removed,  are  obtainable  by  simple  digging  and 
shovelling,  as  from  a  clay  pit.1  Along  the  Mesabi 2  range  of  hills, 
lying  about  one  hundred  miles  northwest  of  the  end  of  Lake  Supe- 
rior, distant  not  many  miles  from  the  Vermilion  range,  vast  tracts 
of  rich  iron  ore,  finely  comminuted  and  easily  worked,  lie  close  to 
the  surface.  Here  a  new  source  of  supply  was  added,  offering 
unique  opportunities  for  exploitation  on  a  great  scale.  These 
opportunities  were  availed  of  with  astounding  quickness.  The 
Mesabi  field  at  once  sprang  into  the  front  rank  among  the  Lake 
Superior  fields,  and,  indeed,  among  all  the  iron  ore  fields  of  the 
world.  In  1890  the  region  was  a  trackless  waste.  In  1892  it  was 
opened  by  railway.  Towns  sprang  up,  huge  steam-shovels  at- 
tacked the  precious  ore,  and  long  trains  carried  it  to  the  newly 
constructed  docks  at  the  port  of  Duluth.  Even  during  the  de- 
pression that  followed  the  crisis  of  1893  the  output  from  this  field 
mounted  year  by  year.  In  1893,  virtually  the  first  year  of  opera- 
tion, 600,000  tons  were  shipped  from  it;  in  1894,  thrice  that 
amount;  and  in  1895  ft  became,  what  it  has  since  remained,  the 

1  It  should  be  noted  that  in  the  Marquette  region,  also,  iron  ore  was  secured  at 
the  first  working  and  for  many  years  thereafter  by  open  cuts.  But  the  extraction  of 
ore  on  a  great  scale  has  proceeded  by  underground  operations. 

2  Variously  spelled:  Mesabi,  Mesaba,  Messabi,  Messaba. 


124         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

most  productive  of  the  iron  mining  districts.  A  little  less  than  half 
of  the  ore  is  of  Bessemer  grade.  Its  physical  constitution,  more- 
over, is  such  that,  for  advantageous  use  in  the  furnace,  other  ore 
needs  to  be  mixed  with  it.  Were  it  all  of  Bessemer  quality,  and 
in  the  best  form,  the  other  fields  might  have  been  entirely  dis- 
placed. With  the  limitations  in  the  quality  of  the  Mesabi  ore,  the 
other  fields  still  found  themselves  able  to  hold  their  own  in  the 
market,  though  their  supremacy  was  ended  by  the  favored  rival. 

For  many  years  the  Lake  Superior  mines  have  been  the  main 
sources  of  supply  for  the  iron  ore  of  the  American  iron  industry. 
A  steadily  increasing  share  of  a  steadily  increasing  total  has  come 
from  them.  In  1910  the  total  iron  ore  product  of  the  country 
exceeded  50  million  tons;  and  over  four-fifths  of  this  enormous 
mass  came  from  the  Lake  Superior  region.1 

In  this  brief  description  of  the  Lake  Superior  iron  region,  refer- 
ence has  been  made  to  the  ports  by  which  the  ore  is  shipped,  — 
Escanaba,  Marquette,  Ashland,  Duluth,  Two  Harbors.  To  each 
of  these  the  ore  must  be  carried  by  rail  from  the  mines,  —  some- 
times a  few  miles,  sometimes,  as  with  a  large  part  of  the  Minne- 
sota supplies,  a  hundred  miles  and  more.  And,  with  this  first 
movement,  only  the  beginning  is  made  on  a  long  journey.  From 
the  shipping  port  the  ore  is  carried  eastward  by  water  to  meet  the 
coal.      Some  goes  down  Lake  Michigan  to  Chicago  and  Gary, 

1  The  United  States  Geological  Survey,  in  its  successive  admirable  Reports  on 
the  Mineral  Resources  of  the  United  States,  has  followed  the  history  of  the  iron  fields 
of  Lake  Superior,  as,  indeed,  of  all  the  mineral  resources  of  the  country.  In  the 
issue  for  1895-96  (forming  vol.  hi  of  the  Seventeenth  Annual  Report  of  the  Survey) 
a  summary  description  is  given,  with  convenient  sketch  maps  showing  the  location 
of  the  several  fields. 

The  relative  importance  of  the  fields,  the  order  in  which  they  were  developed, 
and  their  relation  to  the  iron  ore  production  of  the  whole  country,  are  shown  by  the 
following  figures: 

Iron  Ore  Production  (in  millions  of  gross  tons) 

1880  1890  1900  1910 

Menominee .6  2.3  3.3  4.2 

Marquette 1.4  3.0  3.5  4.4 

Gogebic . .  2.8  2.g  4.3 

Vermilion ..  .9  1.6  1.2 

Mesabi . .  . .  7.8  29.2 

Total  Lake  Superior 2.0  2.5  19. 1  43.4 

Total  United  States 7.1  7.6  27.6  51.2 


A   SURVEY  OF  GROWTH  1 25 

where  it  meets  the  Pennsylvania  coal  about  half-way.  Some 
goes  farther,  through  Lakes  Huron  and  Erie,  and  meets  the  coal  at 
Toledo,  Ashtabula,  Cleveland,  and  other  ports  on  Lake  Erie. 
The  largest  part  is  unloaded  from  the  vessels  at  lake  ports,  and 
carried  by  rail  to  the  heart  of  the  Pittsburgh  coal  district,  there  to 
be  smelted  by  the  coal  on  its  own  ground.  No  small  amount  goes 
even  beyond,  —  to  the  eastward  in  Pennsylvania,  beyond  the 
Pittsburgh  district,  even  into  New  Jersey  and  New  York,  almost 
to  the  seaboard  itself.  Hence  the  cities  of  Erie  and  Buffalo  have 
become  important  ore-receiving  ports  on  Lake  Erie;  the  ore, if  not 
smelted  there,  going  thence  by  rail  on  its  journey  to  the  smelter. 
This  last  and  farthest  invasion  of  distant  regions  by  the  Lake 
Superior  ore  was  promoted  for  many  years  by  the  import  duty  on 
the  competing  foreign  ore  which  sought  to  find  an  entrance  by  the 
Atlantic  seaboard,  —  an  aspect  of  the  iron  trade  of  which  more 
will  be  said  presently. 

The  iron  producing  region  which  depends  on  the  Lake  Superior 
ores  thus  stretches  over  a  wide  district,  the  extreme  ends  being 
separated  more  than  a  thousand  miles.  Close  by  the  iron  mines 
are  a  number  of  charcoal-using  furnaces  in  Wisconsin  and  Michi- 
gan. The  still  unexhausted  forests  of  these  states  supply  this 
fuel  in  abundance;  and  charcoal  iron,  though  long  supplanted  for 
most  uses  by  its  coke-smelted  rival,  has  qualities  which  enable  a 
limited  supply  to  find  a  market,  even  at  a  relatively  high  price. 
Next  in  order  come  Chicago  (South  Chicago)  and  its  suburb  (this 
it  virtually  is)  the  new-created  city  of  Gary;  with  which  must  be 
classed  some  neighboring  cities,  such  as  Milwaukee  in  Wisconsin 
and  Joliet  in  Illinois.  It  is  one  of  the  surprises  of  American  indus- 
try that  iron  manufacturing  on  a  huge  scale  should  be  undertaken 
at  such  points,  distant  alike  from  ore  and  from  coal.  The  coke  is 
moved  hundreds  of  miles  by  rail  from  Pennsylvania,  and  meets 
the  ore  which  has  travelled  no  less  a  distance  from  Lake  Superior. 
Ease  of  access  to  the  western  market  gives  these  sites  an  advan- 
tage, or  at  least  goes  to  offset  the  disadvantage  of  the  longer  rail- 
way haul  of  the  fuel.  Other  iron  producing  points  of  the  same 
sort  are  scattered  along  Lake  Erie.  At  each  of  the  ports  of 
Toledo,  Lorain,  Ashtabula,  Erie,  Buffalo,  especially  Cleveland, 


126         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

ore  is  smelted,  and  iron  and  steel  making  is  carried  on.  But  the 
coal  region  itself  —  Pittsburgh  and  its  environs  —  remains  the 
heart  and  center  of  the  iron  industry.  Hither  most  of  the  ore  is 
carried;  and  here  the  operations  of  smelting,  converting  into 
steel,  fashioning  the  steel  into  rails,  bridges,  plates,  wire,  nails, 
structural  forms  for  building,  are  performed  on  the  greatest  scale. 
For  some  years  the  natural  gas  of  this  region  added  to  its  advan- 
tages and  aided  in  its  exceptionally  rapid  growth.  But  each 
supply  of  gas  exhausted  itself  before  long,  and  new  discoveries 
did  not  maintain  the  inflowing  volume  at  its  first  level.  It  was 
the  abundant  and  excellent  coal  which  formed  the  sure  basis  of 
the  manufacturing  industries,  and  the  permanent  foundation  of 
iron  and  steel  making. 

Whether  the  ore  goes  to  the  coal  or  the  coal  meets  the  ore  half- 
way, one  or  both  must  travel  a  long  journey,  by  land  as  well  as  by 
water.  One  or  both  must  be  laden  and  unladen  several  times. 
A  carriage  of  800,  900,  over  1,000  miles  must  be  achieved,  with 
two  separate  hauls  by  rail.  Fifty  years  ago,  even  thirty  years 
ago,  it  would  have  seemed  impossible  to  accomplish  this  on  a 
great  scale  and  with  great  cheapness.  The  geographical  condi- 
tions on  which  a  large  iron  industry  must  rest  were  supposed  by 
Jevons  in  1866  to  be  the  contiguity  of  iron  and  coal.1  But  here 
are  supplies  of  the  two  minerals  separated  by  a  thousand  miles  of 
land  and  water,  and  combined  for  iron  making  on  the  largest 
scale  known  in  the  world's  history.  One  of  the  most  sagacious  of 
American  students  of  economics,  Albert  Gallatin,  early  predicted 
that  the  coal  area  of  western  Pennsylvania  would  become  the 
foundation  of  a  great  iron  industry,  and  that  only  with  its  devel- 
opment would  the  American  iron  manufacture  attain  a  large  in- 
dependent growth.2     But  he  could  not  dream  that  his  prophecy 

1  Jevons,  The  Coal  Question,  second  edition,  chap.  xv.  Jevons  in  that  chapter 
looked  for  important  changes  in  the  United  States,  chiefly  from  the  wider  use  of 
anthracite  in  iron  making.  The  fact  that  "  the  Americans  are,  of  all  people  in 
the  world,  the  most  forward  in  driving  canals,  river  navigations,  and  railways," 
was  noted  by  him  as  sure  to  affect  the  American  iron  trade;  but  even  his  keen  imagi- 
nation and  wide  knowledge  could  not  foresee  how  much  and  in  what  directions  this 
"  driving  "  would  operate. 

2  "  A  happy  application  of  anthracite  coal  to  the  manufacture  of  iron,  the  dis- 


A   SURVEY  OF  GROWTH  1 27 

would  be  fulfilled  by  the  utilization  of  ores  distant  fifteen  hundred 
miles  from  the  seaboard,  transported  from  a  region  which  was  in 
his  day,  and  remained  for  half  a  centurv  after  his  day,  an  un- 
explored wilderness. 

For  the  iron  trade  the  most  important  section  of  the  Pittsburgh 
coal  district  is  the  famed  Connellsville  coke  region,  lying  some 
fifty  miles  south  of  Pittsburgh,  along  the  banks  of  the  Youghio- 
gheny  river.  Here  is  a  level  and  uniform  outcrop  of  the  best 
coking  coal;  and  from  this  has  come  most  of  the  coke  used  in 
smelting  Lake  Superior  ores,  and,  indeed,  the  greater  part  of  that 
used  in  the  United  States.  Considerable  supplies  have  come  also 
from  other  near-by  regions  in  Pennsylvania  and  West  Virginia; 
and  Alabama  has  made  from  her  own  coal  the  coke  for  smelting 
her  iron.  But  the  Connellsville  coke  is  by  far  the  most  important 
as  regards  both  quantity  and  quality,  and  it  alone  has  steadily 
furnished  more  than  half  of  the  total.  Whether  used  near  the 
mines,  in  the  Pittsburgh  district,  or  carried  hundreds  of  miles  to 
meet  the  ore,  this  unexampled  supply  of  the  best  fuel  has  been 
the  basis  of  the  whole  iron  and  steel  manufacture.1 

covery  of  new  beds  of  bituminous  coal,  the  erection  of  iron  works  in  the  vicinity 
of  the  most  easterly  beds  now  existing,  and  the  improved  means  of  transportation 
which  may  bring  this  at  a  reasonable  rate  to  the  sea-border,  may  hereafter  enable 
the  American  iron  master  to  compete  in  cheapness  with  the  foreign  rolled  iron  in 
the  Atlantic  district.  .  .  .  The  ultimate  reduction  of  the  price  of  American  to 
that  of  British  rolled  iron  can  only,  and  ultimately  will,  be  accomplished  in  that 
western  region  which  abounds  with  ore,  and  in  which  is  found  the  most  extensive 
formation  of  bituminous  coal  that  has  yet  been  discovered  in  any  part  of  the  globe, 
and  this  also  lying  so  near  the  surface  of  the  earth  as  to  render  the  extraction  of 
the  mineral  less  expensive  than  anywhere  else."  Albert  Gallatin,  "  Memorial  to 
the  Free  Trade  Convention"  (1832),  as  reprinted  in  State  Papers  and  Speeches 
on  tJte  Tariff,  pp.  179,  180. 

1  The  production  of  coke  was  (in  tons  of  2,000  lbs.) : 

United  States  Connellsville  region 

1880  3.3  millions  2.2  millions 

1890  11.5        ■  6.5       ■ 

1000  20.5        "  10.4       " 

1910  41.7        "  19.7        " 

In  the  second  column  I  have  combined  in  a  single  figure  the  production  of  the 
older  Connellsville  region  and  that  of  the  "  lower  district  "  which  came  to  be  of  im- 
portance after  1900.  See  Mineral  Resources  of  the  United  States,  191 1,  Part  II, 
pp.  215,  256,  259. 


128         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

The  price  of  coke  to  the  iron  masters  went  down  during  the 
period  here  under  consideration  (1870-1910),  partly  because  of 
cheaper  production  at  the  mines,  partly  because  of  cheaper  car- 
riage from  mines  to  works.  In  the  earlier  years  (about  1870) 
coke  at  the  ovens  was  sold  for  $3.00  a  ton.  Its  price,  while 
fluctuating  greatly,  was  usually  below  $2.00  in  later  years,  even 
falling  as  low  as  $1.00  in  periods  of  depression.  On  the  whole, 
fuel  was  provided  for  the  American  iron  master  at  prices  less  than 
those  paid  by  his  rivals  in  any  part  of  the  world;  while  low  rates 
of  transportation  enabled  it  to  be  carried  to  the  furnaces  without 
sacrifice  of  this  cardinal  advantage. 

The  history  of  the  American  iron  trade  after  1870  thus  came  to 
be  in  no  small  part  a  history  of  transportation.  The  cheap  car- 
riage of  the  ore  and  coal  was  the  indispensable  condition  of  the 
smelting  of  the  one  by  the  other.1  Clearly,  this  factor  was  not 
peculiar  to  the  iron  industry.  The  perfecting  of  transportation 
has  been  almost  the  most  remarkable  of  the  mechanical  triumphs 
of  the  United  States.  Great  as  have  been  the  evils  of  our  railway 
methods,  disheartening  as  have  been  some  of  the  results  of  un- 
fettered competition,  the  efficiency  of  the  railways  has  been 
brought  to  a  point  not  approached  elsewhere,  largely  in  conse- 
quence of  that  very  competition  whose  ill  effects  have  been  so 
often  and  so  justly  dwelt  on.  In  the  carriage  of  iron  ore  and  of 
coal  the  methods  of  railway  transportation  which  had  been  de- 

1  "  Few  people  who  have  not  actually  run  a  blast-furnace  realize  what  it  means 
to  fill  the  capacious  maw  of  one  of  these  monsters  with  raw  material.  A  stack  of 
200  tons'  daily  capacity,  running  on  50  per  cent  ore,  must  have  delivered  to  it  each 
day  something  more  than  400  tons  of  ore,  250  to  300  tons  of  coke,  according  to 
the  character  of  the  metal  required,  and  over  100  tons  of  limestone,  —  say  900 
tons  of  raw  materials.  Add  the  200  tons  of  pig-iron  shipped  out,  and  we  have  a 
daily  freight  movement  of  1,100  tons,  taking  no  note  of  the  disposition  of  the  slag. 
This  is  55  carloads  of  20  tons  each  [A  modern  ore  car  will  carry  50  to  60  tons;  and 
coal  cars  have  been  introduced  carrying  90  tons.  —  F.  W.  T.].  .  .  .  Starting  up 
a  furnace  of  ordinary  capacity  calls  immediately  for  the  labor,  from  first  to  last,  of 
nearly  a  thousand  men;  for  the  use  of  at  least  a  thousand  railway  cars,  and  many 
locomotives;  for  perhaps  several  steamers  and  vessels  on  the  lakes."  A.  Brown. 
"The  Outlook  in  the  American  Iron  Industry,"  in  the  Engineering  Magazine, 
October,  1899,  p.  88.  —  By  1910,  the  daily  capacity  of  a  "  modern  "  iron  furnace 
had  again  been  doubled,  reaching  400  tons  a  day,  and  bringing  a  corresponding 
increase  in  the  ore  and  fuel  required. 


A  SURVEY  OF  GROWTH  1 29 

veloped  under  the  stress  of  eager  competition  were  utilized  to  the 
utmost;  and  the  same  was  true  of  the  transfer  from  rail  to  ship 
and  from  ship  to  rail  again,  of  the  carriage  in  the  ship  itself,  and 
of  the  handling  of  accumulated  piles  of  the  two  materials.  The 
ore  is  loaded  on  cars  at  the  mines  by  mechanical  appliances.  At 
the  Mesabi  mines  the  very  steam-shovel  that  digs  the  ore  from 
the  ground  deposits  it  in  the  adjacent  car.  At  the  lake,  high  ore- 
docks  protrude  hundreds  of  yards  into  the  water.  On  top  of  them 
run  the  trains,  the  ore  dropping  by  gravity  from  openings  in  the 
car-bottoms  into  the  pockets  of  the  docks.  Thence  it  drops  again 
through  long  ducts  into  the  waiting  vessels,  ranged  below  along- 
side the  dock.  At  every  step  direct  manual  labor  is  avoided,  and 
machines  and  machine-like  devices  enable  huge  quantities  of  ore 
to  be  moved  at  a  cost  astonishingly  low.1  The  vessels  themselves, 
constructed  for  the  service,  carry  the  maximum  of  cargo  for  the 
minimum  of  expense;  while  the  machinery  for  rapid  loading  and 
unloading  reduces  to  the  shortest  the  non-earning  time  of  lying 
at  the  docks.  At  the  other  end  of  the  water  carriage,  especially 
on  Lake  Erie,  similar  highly  developed  mechanical  appliances 
transfer  from  boat  to  railway  car  again,  or,  at  will,  to  the  piles 
where  stocks  are  accumulated  for  the  winter  months  of  closed 
navigation.  At  either  end  the  railway  has  been  raised  to  the 
maximum  of  efficiency  for  the  rapid  and  economical  carriage  of 
bulky  freight.  What  has  been  done  for  grain,  for  cotton,  for 
lumber,  for  all  the  great  staples,  has  been  done  here  also,  and  here 
perhaps  more  effectively  than  anywhere  else:  the  plant  has  been 
made  larger  and  stronger,  the  paying  weight  increased  in  propor- 
tion to  the  dead  weight,  the  ton-mile  expense  lessened  by  heavier 
rails,  larger  engines,  longer  trains,  and  easier  grades,  the  mechan- 
ism for  loading,  unloading,  transhipping  perfected  to  the  last 

1  "  Every  extra  handling  means  more  cost.  .  .  .  Formerly  it  was  necessary 
to  trim  the  cargoes;  and  this  had  to  be  done  by  hand,  and  gave  employment  to  a 
great  many  men  at  exceedingly  high  wages.  The  work,  however,  was  killing  while 
it  lasted.  Now  trimming  is  in  most  cases  done  away  with,  because  the  immense 
size  of  the  freighters  renders  them  stable  in  any  weather;  and,  if  there  is  any  great 
inequality  in  the  trim  of  the  boat,  it  is  rectified  by  shifting  the  water  ballast  from 
one  compartment  to  another."  Peter  White,  The  Mining  Industry  of  Northern 
Michigan,  in  Publ.  Mich.  Pol.  Sci.  Assoc,  hi,  p.  153. 


130         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

degree,  or  to  what  seems  the  last  degree  until  yet  another  stage 
towards  perfection  is  invented.  And  evidently  here,  as  elsewhere, 
the  process  has  been  powerfully  promoted  by  unhampered  trade 
over  a  vast  territory,  and  the  consequent  certainty  that  costly 
apparatus  for  lengthened  transportation  will  never  be  shorn  of 
its  effectiveness  by  a  restriction  in  the  distant  market. 

Still  another  factor  has  been  at  work  in  the  iron  trade,  as  in 
other  great  industries,  —  the  march  of  production  to  a  greater 
and  greater  scale,  and  the  combination  of  connected  industries 
into  great  single-managed  systems.  The  iron  trade  showed  more 
markedly  than  any  of  the  great  industries  the  manifestations  of 
the  new  conditions.  Both  vertical  and  horizontal  combination 
proceeded  apace. 

Of  these  two  forms  of  combination,  the  former  —  single  man- 
agement of  successive  stages  in  production,  the  "  integration  '; 
of  industry,  —  developed  first,  and  contributed  most  surely  and 
most  largely  to  the  effectiveness  of  production.  Iron  mines,  coal 
mines,  coke  ovens,  railways,  steamers,  docks,  smelting  works, 
converting  works,  rolling  mills,  steel  works,  machine  shops, — 
these  were  combined  into  imposing  complexes.  The  great  iron 
and  steel  companies  operated  iron  mines  on  Lake  Superior,  coal 
mines  and  coke  establishments  in  Pennsylvania,  docks  and  rail- 
ways, as  well  as  iron  and  steel  works  proper.  The  largest  of  them, 
the  Carnegie  Company,  built  as  early  as  1897  a  railway  of  its  own, 
specially  equipped  for  the  massive  and  cheap  carriage  of  ore  and 
fuel,  from  the  shore  of  Lake  Erie  to  the  Pittsburgh  coal  district. 
At  its  terminus  on  Lake  Erie  (Conneaut)  a  new  harbor  and  a  new 
city  were  created.  The  economy  in  production  from  such  widely 
ramifying  organizations  is  not  merely  or  chiefly  in  dispensing 
with  the  services  and  saving  the  gains  of  so  many  indepen- 
dent middlemen:  it  arises  mainly  from  consistent  planning  of 
every  stage,  the  nice  intercalation  of  operations,  the  sweeping 
introduction  from  end  to  end  of  expensive  and  rapid-working 
machinery,  continuously  supplied  under  homogeneous  admin- 
istration with  the  huge  quantities  of  material  which  alone  make 
possible  the  effective  and  economical  utilization  of  the  great 
plant. 


A   SURVEY  OF  GROWTH  131 

The  horizontal  form  of  combination,  —  what  has  come  to  be 
known  as  the  trust,  —  appeared  later;  and  the  extent  of  its  con- 
tribution to  industrial  effectiveness  is  not  so  certain.  The  extra- 
ordinary burst  of  consolidation  and  combination  at  the  opening 
of  the  present  century  is  familiar.  The  most  momentous  and 
conspicuous  single  episode  was  the  formation  of  the  United 
States  Steel  Corporation  in  1901.  Sundry  other  horizontal  com- 
binations in  the  iron  industry  had  preceded  it,  such  as  the  steel 
and  wire  combination,  and  others  for  steel  hoop  and  tin  plate. 
The  giant  Steel  Corporation  gathered  them  into  one  fold.  Not 
that  the  whole  of  the  iron  and  steel  trade  was  absorbed :  perhaps 
one-half  of  the  output  of  the  crude  materials  (coal,  ore,  and  pig- 
iron)  came  under  its  control,  with  a  larger  share  for  some  of  the 
finished  products.  A  considerable  number  of  enterprises  remained 
independent.  Each  of  these  was  on  a  large  scale,  compared  with 
the  units  of  the  previous  generation.  Each  carried  on  vertical  com- 
bination, operating  its  own  mines  of  ore  and  coal,  and  carrying 
the  iron  to  the  stage  of  steel  and  its  semi-finished  products.  The 
Steel  Corporation  itself  carried  this  form  of  industrial  organiza- 
tion to  a  greater  degree  than  any,  more  particularly  in  its  conduct 
of  transportation  by  land  and  water.  It  has  never  been  doubted 
that  well-managed  vertical  combination  conduced  to  efficiency  in 
the  iron  trade.  Whether  the  other  form,  —  single  management 
of  all  the  establishments  doing  the  like  things,  —  conduced  also 
to  efficiency,  is  more  open  to  question.  The  motive  for  it  was 
beyond  question  double:  in  part  an  expectation  that  consolida- 
tion would  lead  to  economies;  but,  no  less,  a  wish  to  put  an  end 
to  competition,  to  secure  gains  from  monopoly  or  quasi-monopoly, 
or  at  all  events  to  avoid  the  paring  of  profits  under  competition. 
That  the  huge  iron  and  steel  enterprises  produce  more  cheaply 
than  their  smaller  predecessors  is  beyond  question;  but  how  far 
that  cheapening  has  been  further  promoted  by  the  combination 
of  parallel  and  competing  enterprises  is  among  the  economic 
problems  still  unsolved.1 

1  Of  the  enterprises  merged  in  the  Steel  Corporation,  the  two  largest,  before 
1900,  were  the  Carnegie  Company,  and  the  Federal  Steel  Company,  the  latter 
dominated  by  the  firm  of  J.  P.  Morgan  &  Co.  Both  carried  on  vertical  combina- 
tion on  a  great  scale,  —  mining  the  coal  and  ore,  transporting  them  on  railways 


132         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

While  the  Lake  Superior  ores,  utilized  under  the  conditions 
just  described,  constituted  by  far  the  most  important  source  of 
supply  for  the  iron  industry,  a  large  contribution  came  from 
another  source,  also,  —  from  the  southern  states. 

In  the  region  where  the  states  of  Tennessee,  Alabama,  and 
Georgia  adjoin,  the  conditions  once  thought  indispensable  for  a 
flourishing  iron  industry  exist  in  perfection.  Here  are  great 
deposits  of  ore,  easy  of  working;  and  close  by  them  great  de- 
posits of  coking  coal,  no  less  easily  worked.  Before  the  civil 
war,  these  natural  advantages  were  not  utilized:  the  regime  of 
slavery  and  the  lack  of  means  of  transportation  prevented  any 
resort  to  them.  But  with  the  quickening  of  the  industrial  life  of 
the  south  when  once  the  civil  war  and  reconstruction  were 
passed,  the  mineral  resources  of  this  region  were  developed  on  a 
rapidly  enlarging  scale.  Alabama,  where  the  best  deposits  of 
coal  occur,  became  a  great  iron  producing  state:  here  again, 
though  for  a  less  distance  and  on  a  smaller  scale,  the  ore  made  its 
journey  to  the  coal.  The  rate  of  growth  was  most  rapid  between 
1880  and  1890:  the  pig-iron  output  of  Alabama  rose  from  69,000 
tons  in  1880  to  915,000  in  1890.  In  1900,  it  was  1,200,000  tons; 
in  1910,  near  2,000,000  tons.  The  large  supply  of  labor  at  low 
wages  contributed  to  the  easy  and  profitable  utilization  of  this 
source  of  supply.  The  free  negro  turned  miner,  and  proved  not 
only  a  docile  laborer  but  also,  —  paid,  as  miners  are,  according 
to  the  tonnage  brought  to  the  pit's  mouth,  —  on  the  whole  an 
efficient  one. 

The  southern  ore  contains  phosphorus  in  too  large  amounts  to 
make  it  available  for  the  Bessemer  process;  and  this  for  some  time 

and  vessels  of  their  own,  and  operating  great  iron  and  steel  works.  The  Carnegie 
works  centered  about  Pittsburgh,  the  Federal  about  Chicago.  The  American  Steel 
&  Wire  Co.  illustrated  both  vertical  and  horizontal  combination.  The  same  was 
the  case  with  the  so-called  "Moore  properties":  the  National  Steel  Company 
with  its  affiliations,  the  Sheet  Steel,  Tin  Plate,  and  Steel  Hoop  companies.  The 
Bridge  (structural  steel)  and  Tube  companies  had  no  raw-material  supplies  of  their 
own,  and  so  represented  horizontal  combination  only. 

The  history  of  the  great  consolidation  has  often  been  told.  The  authoritative 
account  is  in  the  Report  of  the  Commission  of  Corporations  on  the  Steel  Industry, 
Part  I  (1911).  An  excellent  summary  is  in  Berglund,  The  United  States  Steel  Cor- 
poration, in  Columbia  University  Studies  (1907). 


A   SURVEY  OF  GROWTH  I  33 

gave  it  a  place  somewhat  apart  in  the  iron  industry  of  the  coun- 
try. The  iron  made  from  it  did  not  compete  with  that  from  the 
Lake  Superior  ore,  and  was  used  chiefly  for  general  foundry  pur- 
poses. Marketed  at  a  very  low  price,  the  increasing  supplies 
made  their  way  to  places  farther  and  farther  removed.  Pitts- 
burgh itself  soon  used  Alabama  iron  for  foundry  purposes;  the 
western  states  and  the  eastern  alike  were  supplied;  in  New 
England  it  displaced  Scotch  pig,  previously  imported  in  con- 
siderable quantity. 

With  the  opening  of  the  twentieth  century,  the  technical  de- 
velopment of  the  industry  took  in  some  respects  a  new  direction ; 
but  the  changes  were  of  no  considerable  significance  for  the  tariff 
problems.  Bessemer  ore  and  Bessemer  steel,  which  had  domi- 
nated before  1900,  were  in  part  supplanted.  For  some  time  (since 
about  1880)  Germany  had  been  making  steel  from  phosphoric 
ores  by  the  basic  (Thomas- Gilchrist)  process;  indeed,  that  process 
had  influenced  the  growth  of  the  German  iron  industry  as  pro- 
foundly as  did  the  Bessemer  process  the  growth  in  the  United 
States.  Bessemer  ores,  though  the  deposits  were  by  no  means 
exhausted  in  the  United  States,  became  less  plentiful,  and  hence 
somewhat  higher  in  price;  a  growing  proportion  of  steel  came  to 
be  made  from  basic  ore  and  iron.  In  addition,  a  steadily  in- 
creasing amount  of  steel  was  made  by  the  open-hearth  process, 
which  is  available  both  for  Bessemer  and  non-Bessemer  iron. 
Open-hearth  steel  is  supposed  to  be  tougher  than  Bessemer  steel, 
and  has  been  in  demand  for  rails  and  other  purposes.  By  1910 
the  output  of  open-hearth  steel  (preponderantly  from  basic  iron) 
exceeded  that  of  Bessemer  steel.  One  consequence  was  a  facili- 
tation of  competition,  since  control  of  the  Bessemer  ores,  so 
greatly  prized  before,  was  of  lessened  importance.  These 
changes,  however,  had  no  appreciable  effect  on  the  geographical 
distribution  of  the  industry  or  on  its  relation  to  possible  imports. 
Lake  ore  and  Pittsburgh  iron  remained  the  dominant  factors,  and 
the  industry  continued  to  be  unaffected  by  foreign  competition 
both  because  of  its  technical  strength  and  because  its  main  seats 
were  far  inland. 


134         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

The  outcome  of  the  great  changes  in  the  geographical  distribu- 
tion of  the  iron  industry  is  shown  in  the  following  tabular 
statement :  — 


Production  of  Pig-Iron  est  the  United  States  x 
(In  thousands  of  gross  tons:  1,217  =  1,217,000  tons) 


1872 

1 880 

1890 

iyoo 

1,217 

1,610 

2,342 

i,9°3 

387 

772 

2,561 

4,922 

849 

1,502 

4,517 

8,756 

127 

238 

i,554 

2,356 

2,549 

3,835 

9,203 

13,789 

igio 


Eastern  District  (eastern  Penn- 
sylvania, New  York,  New  Jer- 
sey)      

Western  Pennsylvania  alone  .    . 

Central  District  (western  Penn- 
sylvania, Ohio,  Indiana,  Illi- 
nois)     

Southern  District  (Alabama, 
Tennessee,  Virginia,  Mary- 
land)    

Total  for  United  States  .... 


2,868  2 
10,621 


20,301 


3,io7 
27,303 


In  the  eastern  district  proper  the  output  barely  held  its  own. 
The  total  production  in  1910  was  not  greater  than  in  1872.  On 
the  other  hand,  the  central  district  increased  its  production 
steadily  and  enormously,  whether  in  western  Pennsylvania  itself 
or  in  the  neighboring  states  of  Ohio,  Indiana,  Illinois.  This  is 
the  region  where  Lake  Superior  ore  is  smelted  with  Pittsburgh 
coal:  in  and  about  Pittsburgh  itself,  in  the  immediately  adjacent 
parts  of  Ohio,  and  at  the  various  lake  cities  where  the  ore  meets 
the  coal,  Chicago,  Cleveland,  Toledo,  and  the  rest.     Almost  as 

1  In  this  table  the  figure  for  eastern  Pennsylvania  is  for  the  iron  smelted  in  the  state  with  anthra- 
cite, or  anthracite  and  coke  mixed,  while  that  for  western  Pennsylvania  is  for  the  bituminous  (coke) 
iron.  The  separation  by  fuels,  it  is  true,  does  not  indicate  with  complete  accuracy  the  geographical 
distribution.  But  the  iron  smelted  in  Pennsylvania  east  of  the  Appalachian  chain  was  formerly 
smelted  almost  entirely  with  anthracite,  and  is  still  smelted  mainly  with  a  mixture  of  anthracite  and 
coke;  and,  at  all  events,  this  was  the  only  mode  in  which  the  statistics  at  hand  made  it  possible  to 
separate  the  eastern  and  western  parts  of  Pennsylvania. 

In  the  southern  district,  Virginia  and  Maryland  are  near  the  seaboard,  and  might  be  constituted 
a  group  apart  from  the  other  states  there  included.  But  the  iron  industry  in  them,  as  in  the  others, 
is  of  recent  growth,  and  depends  both  for  ore  and  fuel  on  different  sources  of  supply  from  those  of 
the  northern  seaboard  region.  By  far  the  most  important  iron  producing  state  in  the  southern  dis- 
trict of  the  table  is  Alabama. 

1  The  increase  in  this  district  is  due  entirely  to  the  development  of  great  steel  plants  in  Buffalo, 
N.  Y.,  using  Lake  ore  and  Pennsylvania  coal,  and  therefore  belonging  industrially  rather  to  the 
central  district  than  to  the  eastern. 


A   SURVEY  OF  GROWTH  1 35 

striking  is  the  rate  of  growth  in  the  southern  district,  of  which 
Alabama  is  the  most  important  state.  While  the  total  produc- 
tion here  was  far  outweighed  by  that  in  the  central  district,  it 
exceeded  after  the  opening  of  the  present  century  that  of  the 
eastern  district. 

Another  aspect  of  the  subject  appears  in  the  labor  situation. 
The  power  of  the  labor  unions  among  the  iron  workers  has  been 
less  in  the  United  States  than  in  Great  Britain.  The  Amalga- 
mated Association  of  Iron  and  Steel  Workers  had  been  in  1870- 
90  a  powerful  organization,  modelled  on  the  British  unions  and 
strong  in  its  bargaining  with  the  employers.  But  the  Carnegie 
Company  cut  loose  from  it  a  decade  before  the  formation  of  the 
Steel  Corporation.  The  great  Homestead  strike  of  1892,  almost 
a  pitched  battle,  resulted  in  the  defeat  of  the  Amalgamated  Asso- 
ciation. Shortly  after  the  great  consolidation,  the  Steel  Cor- 
poration itself  faced  (in  1902)  a  strike  from  the  Association. 
Again  the  union  suffered  a  defeat.  The  Carnegie  works  had  been 
put  on  a  non-union  basis  after  the  Homestead  strike;  most  of  the 
other  works  of  the  Steel  Corporation  were  similarly  made  non- 
union after  the  strike  of  1902.  The  Amalgamated  Association 
retained  a  hold  in  a  few  of  the  Steel  Corporation's  works,  and  in 
some  independent  establishments.  But  it  was  shorn  of  its  former 
considerable  power,  and  the  course  of  the  iron  industry  was  little 
affected  by  trade  union  complications. 

In  consequence  the  American  iron  and  steel  master  was  free  to 
push  on  with  new  processes,  to  remodel  and  improve  organization, 
to  readjust  his  labor  force.  In  this  respect  he  had  an  advantage 
over  his  British  rival.  Whatever  be  one's  sympathy  with  labor 
organizations,  it  is  not  to  be  denied  that  a  well-entrenched  union 
tends  to  oppose  the  introduction  of  labor  saving  devices.  This 
attitude  is  the  inevitable  consequence  of  the  dependence  of 
laborers  on  hire  by  capitalist  employers.  The  first  effect  of  a 
new  machine  or  a  better  rearrangement  is  to  displace  some 
laborers  or  to  lower  their  pay.  Moreover,  the  belief  in  "  making 
work  "  is  too  deep-rooted  to  permit  the  installation  of  improved 
processes  without  strong  even  though  silent  opposition.    The 


136         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

mere  existence  of  a  powerful  union,  —  one  not  to  be  fought  with- 
out heavy  loss, — has  a  benumbing  influence,  checking  the  very 
consideration  of  radical  changes  and  tending  to  keep  industry  in 
its  established  grooves.  Such  was  and  is  the  influence  of  the 
strong  organization  of  the  British  iron  workers  (the  engineers); 
it  led  to  struggles  and  strikes,  in  which  the  union,  though  some- 
times beaten,  retained  a  strong  position.  The  American  iron 
makers,  themselves  men  of  overmastering  temperament,  and 
engaged  in  an  industry  where  changes  were  rapid,  shook  loose 
from  this  sort  of  control.  Beyond  doubt,  they  were  also  induced 
to  adopt  a  drastic  non-union  policy  by  another  circumstance; 
infraction  of  discipline  by  the  union  men  and  their  opposition  to 
discharge  of  the  insubordinate  and  incompetent.  This  phase  of 
unionism  has  shown  itself  in  the  United  States  more  than  in  other 
countries,  the  impulse  to  domination  among  the  employers  being 
matched  by  the  same  propensity  among  their  employees.  The 
most  friendly  observer  of  the  trade-union  movement  in  the  Ameri- 
can iron  trade  was  compelled  to  confess  the  faults  of  the  unionists 
in  this  regard.1  All  in  all,  the  defeat  of  the  union  movement 
served  to  make  the  iron  industr^more  free  and  more  vigorous,  so 
far  as  concerns  the  advance  of  ^^ductive  power  and  the  cheap- 
ening of  the  products.  ^* 

It  need  not  be  said  that  this  by  no  means  tells  the  whole  story, 
or  makes  a  conclusive  case  for  the  policy  of  the  iron  masters  on 
unionism.  The  bargaining  of  the  unorganized  workmen  with 
a  powerful  employer  resulted  in  evil  conditions,  or  at  least  delayed 
the  abolition  of  evil  conditions,  more  especially  as  regards  the 
long  hours  of  work.  The  twelve-hour  day  and  the  seven-day 
week  —  ugly  blots  on  any  industry  —  were  more  easily  main- 
tained than  could  have  been  the  case  if  a  strong  union  had  been 
in  the  field.  No  doubt  the  much-attacked  Steel  Corporation  was 
not  the  worst  offender.  As  regards  wages,  hours,  safety,  sanitary 
conditions,  it  was  not  usually  behind  its  competitors;  more  often 
it  was  in  advance  of  them;  but  it  set  the  example  of  trying  to 
stamp  out  unionism,  and  so  preventing  the  men  from  pressing 
their  claims. 

1  See  Fitch,  The  Steel  Workers,  pp.  102-103. 


A   SURVEY  OF  GROWTH  1 37 

Even  more  dubious  in  its  social  consequences  was  another  phase 
of  the  labor  situation,  —  the  condition  of  the  unskilled  workers. 
The  very  great  numbers  of  these  employed  in  the  iron  industry 
were  recruited  almost  exclusively  from  the  newly  arrived  immi- 
grants. The  same  is  the  case  in  the  coal  mines  and  at  the  coke 
ovens.  Such  nationalities  as  the  Italians,  the  Bohemians,  the 
so-called  Huns  and  Polaks  from  the  Slavonian  parts  of  Austro- 
Hungary,  supplied  the  men  for  heavy  and  dirty  work.  Needless 
to  say,  the  iron  industry  was  not  peculiar  in  this  regard.  All 
manufacturing  industries  were  profoundly  affected  by  the 
abundant  supply  of  unskilled  laborers  willing  to  work  at  com- 
paratively low  rates  of  pay. 

Nowhere  was  this  influence  of  a  cheap  labor  force  more  strik- 
ing than  in  the  fuel  supply.  The  nature  of  the  operations  caused 
cheapness  to  be  attained  at  the  coal  mines  and  coke  ovens,  partly 
indeed  by  machinery  and  organization,  but  largely  by  cheap 
labor.  The  mining  of  coal  is  mainly  pick-and-shovel  work,  re- 
quiring little  handicraft  skill  or  trained  intelligence;  and  this  is 
still  more  true  of  the  work  at  the  coke  ovens.  The  coal  mines  of 
the  United  States  drew  to  themselves  the  lowest  and  poorest 
kinds  of  manual  labor;  except^fteed,  where  machines  for  cutting 
the  coal  proved  applicable,  ^n  skilled  and  intelligent  mechanics 
were  consequently  called  on  to  work  them.  The  miners  in  Eng- 
land seem  to  have  maintained  a  better  relative  position.  Their 
trade  organization  has  been  strong,  the  standard  of  living  and  of 
efficiency  comparatively  high.  In  the  United  States  multitudes 
of  newly  arrived  immigrants  have  been  drawn  to  the  mines,  partly 
through  deliberate  arrangement  by  the  employers,  partly  through 
the  silent  adjustment  of  supply  to  demand.  There  they  have 
huddled,  —  inert,  stolid,  half -enslaved.  The  nationalities  that 
have  contributed  of  late  years  so  heavily  to  our  immigration  have 
here  found  employment  such  as  they  could  at  once  turn  to.  In 
times  of  activity  their  condition  is  passable.  In  the  periods  of  de- 
pression which  recur  in  the  iron  trade,  the  price  of  coke  sinks,  pro- 
duction is  restricted,  wages  fall,  and  the  barest  living  is  all  that 
the  miners  and  coke  workers  can  secure,  —  sometimes  not  even 
this .    The  American  or  Americanized  laborers  met  a  disheartening 


138         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

situation  and  tried  in  vain  to  stem  the  tide  of  falling  wages  and 
half-employment,  with  its  attendant  misery,  strikes,  bloodshed. 
So  far  as  concerns  the  relation  of  domestic  producers  to  foreign, 
the  effect  of  this  cheapness  of  unskilled  labor  was  the  same  as  if 
labor-saving  devices  had  been  introduced  for  cheapening  the 
heavy  work.  Not  a  few  mechanical  devices  were  introduced, 
in  the  iron  trade  and  elsewhere,  for  work  of  this  kind,  such  as 
steam-shovels,  and  loading  and  unloading  machinery  for  vessels. 
But  an  immense  amount  of  brute  muscular  work  remained.  This 
would  normally  be  dear  in  a  country  of  high  wages  and  free 
opportunities.  In  such  a  country  one  would  not  expect  men  to 
turn  to  it  unless  attracted  by  good  pay;  and  to  the  employer,  as 
has  been  already  set  forth,  good  pay  always  presents  itself  as  an 
obstacle.  It  might  be  expected,  therefore,  that  industries  in 
which  coarse  manual  labor  is  called  for  would  be  at  a  comparative 
disadvantage  in  the  United  States.  But  the  anomalous  labor 
conditions  resulting  from  the  influx  of  immigrants  largely  re- 
moved the  employers'  obstacle :  the  labor  was  and  is  cheap.  Not 
that  it  has  been  as  cheap,  in  terms  of  money,  as  in  European 
countries.  Humanitarian  persons  who  are  shocked  by  the  low 
wages  and  evil  conditions  of  our  congested  immigrant  districts 
sometimes  declare  that  these  people  are  no  more  prosperous  than 
at  home.  This  is  going  too  far:  the  fact  that  they  continue  to 
pour  in  by  the  hundred  thousand,  still  more  that  those  on  the 
ground  steadily  send  for  their  relatives  and  friends,  proves  that 
some  gain  is  secured.  But  only  a  sort  of  half-way  position  is 
attained,  —  higher  than  the  European,  not  so  high  as  the  normal 
American.  Whether  the  well-being  of  the  American  people  as  a 
whole,  or  that  of  humanity  as  a  whole,  has  been  promoted  by  this 
social  and  industrial  revolution,  is  a  most  intricate  question,  which 
need  not  here  be  considered.  It  suffices  for  the  purposes  of  the 
present  inquiry  to  point  out  that  common  labor  has  been  cheap, 
measured  by  American  standards,  and  that  the  employer  needing 
much  of  it  has  not  been  compelled  to  bid  very  high.  The  result 
is  the  same  for  him,  to  repeat,  as  if  he  had  devised  effective  ma- 
chinery for  doing  the  work  and  had  in  this  way  secured  a  compara- 
tive advantage. 


CHAPTER  X 

HOW  FAR   GROWTH  WAS  DUE  TO  PROTECTION 

After  this  survey  of  the  growth  of  the  iron  industry  and  of  the 
main  factors  that  have  been  at  work,  we  are  prepared  to  consider 
what  has  been  the  influence  of  the  protective  system. 

It  will  be  of  service  to  note  at  the  outset  the  duties  on  two  typi- 
cal articles.  On  pig-iron  the  rate  was,  in  round  numbers,  $7.00 
per  ton  from  1870  to  1894;  it  was  $4.00  per  ton  from  1894  to  1909. 
On  steel  rails,  the  rate  was  $28.00  per  ton  from  1870  to  1883; 
$17.00  from  1883  to  1890;  $13.44  from  1890  to  1894;  and  $7.84 
from  1894  to  1909.  The  duties  in  force  from  1909  to  19 13  are  of 
no  importance  for  the  present  inquiry.  Indeed,  those  imposed 
in  the  tariff  act  of  1897  are  not  of  consequence;  for,  as  will  pres- 
ently appear,  the  great  industrial  changes  significant  for  our 
problems  occurred  in  the  period  from  1870  to  1897.  Throughout 
that  period  the  duties  on  both  of  the  articles  mentioned,  and  on 
all  the  cruder  forms  of  iron  and  steel,  were  specific  (by  weight), 
and  were  highly  protective.  The  duty  on  steel  rails  was  par- 
ticularly high,  being  equivalent  to  one  hundred  per  cent  on  the 
foreign  price  during  most  of  the  time  from  1870  to  1883,  and 
from  1883  to  1894  still  equivalent  to  between  fifty  and  eighty  per 

cent.1 

1  Duties  on  Pig-Iron  and  on  Steel  Rails,  1870-19 13 

{Per  gross  ton  of  2,240  lbs.) 

Pig-Iron    Steel  Rails 

Act  of  July  14,  1870 $7.00  $28.00 

*      June  6,  1872 6.30  25.20 

"      March  3,  1875 7.00  28.00 

"      March  3,  1883 6.72  17.00 

"      October  i,  1890  ("  McKinley  ") 6.72  1344 

"      August  27,  1894  ("  Wilson  ") 4.00  7.84 

■      July  24,  1907  ("  Dingley  ") 4-°o  7-84 

"      August  s,  1909  ("  Payne-Aldrich ") 2.50  3.92 

0                 "     1913 free  free 

The  war  duty  on  pig-iron  had  been  $9.00  a  ton;  it  was  reduced  to  $7.00  in 
1870.  Steel  rails  as  a  separate  item  appeared  for  the  first  time  in  1870.  The 
reductions  of  duties  in  1872  were  part  of  the  "  horizontal  "  10  per  cent  reduction 


7 


139 


140         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

The  extraordinary  growth  of  the  domestic  industry  has  already 
been  described.  So  far  as  the  increase  of  domestic  production  is 
concerned,  the  protectionist  may  well  point  with  pride.  If  the 
justification  of  his  policy  is  to  be  determined  by  this  test,  there 
can  be  no  question  that  the  history  of  the  American  iron  trade 
gives  superabundant  proof  of  success.  The  record  indicated  by 
the  mounting  production  of  pig-iron  is  matched  in  almost  every 


i 

~hart  II 

Average  Prices  of  Steel  Rails 
in  England  and  United  States 

$100 

.90 

in  United  States1 
in  England 

.80 
70 

\ 

^ 

\ 

/ 

k. 

60 

r 

' 

\ 

50 

* 

\ 

/ 

\ 

40 

*•■> 

* 

--- 

t 

» 



30 

j 

"  *. 

-. 

_. 

.^ 

», 

_. 

-/ 

*« 

> 

.' 

- ..- 

20 
10 

~~ 

" 

1871    73     75     77     79     *81     '83     '85     '87     '89     '91      '93     '95     '97      '99    1901    '03     '05      '07     '09     '11 

branch  of  the  industry.  For  steel  rails,  the  other  article  referred 
to  in  the  preceding  paragraph  as  typical,  we  find  a  growth  from 
no  production  at  all  in  1870  to  an  output  of  1,000,000  tons  by 
1880,  of  nearly  2,000,000  tons  by  1890,  and  after  that  one  regu- 
lated solely  by  the  requirements  of  the  railways.  The  increase  in 
the  domestic  product  has  been  enormous. 

But  not  only  this:  the  fall  in  domestic  prices  has  been  unmis- 
takable. 

Let  the  reader  glance  at  the  appended  chart.  It  shows  the 
price  of  steel  rails,  in  Great  Britain  and  in  the  United  States,  year 
by  year  from  1870  to  1910.  For  the  first  twenty-five  years  of  this 
period,  until  about  1895,  the  American  price  ranged  higher  than 
the  British.  The  gap  between  the  two  lines  is  great,  and  it  per- 
sists. Prices  could  not  have  differed  so  greatly  but  for  the  high 
duty.  Some  excess  of  price  in  the  United  States  would  no  doubt 
have  appeared  even  under  free  trade,  —  enough  to  cover  trans- 
portation charges.  But  this  very  marked  excess  could  not  have 
continued  but  for  the  duty.     During  many  of  the  years  between 

made  on  most  manufactured  articles  in  that  year,  repealed  in  1875. —  F°r  the 
history  of  the  various  tariff  acts  and  the  way  in  which  the  iron  and  steel  duties 
were  dealt  with  in  them,  the  reader  is  referred  to  my  Tariff  History  of  the  United 
States. 


HOW  FAR  GROWTH  WAS  DUE  TO  PROTECTION     I4I 

1870  and  1895  imports  of  steel  rails  were  considerable,  showing 
that  the  domestic  price  was  higher  than  the  foreign  price  by  the 
full  amount  of  the  duty.  During  other  years  of  this  period  im- 
ports ceased;  but  domestic  prices,  though  not  higher  by  the  full 
amount  of  the  duty,  were  still  considerably  higher.  Throughout 
the  quarter  century  the  protective  duty  raised  the  price  of  the 
total  supply,  whether  imported  or  domestic.  The  railways  were 
compelled  to  pay  more  for  their  rails,  and  the  public  presumably 
more  in  rates  for  the  carriage  of  passengers  and  freight.  Pre- 
sumably, be  it  said,  for  the  relation  between  the  cost  of  construct- 
ing railways  and  the  rates  charged  for  railway  service  is  a  loose 
and  uncertain  one.  Steel  rails  were  a  cardinal  factor,  during 
precisely  these  years,  in  enabling  railway  traffic  to  be  conducted 
more  effectively  and  charges  to  be  lowered.  Probably  rates 
would  have  been  reduced  even  more  had  rails  been  cheaper;  but 
it  would  be  hazardous  to  reckon  how  far  the  tariff  system,  in 
keeping  up  their  price,  brought  a  burden  on  the  general  public, 
how  far  it  simply  lessened  the  profits  or  increased  the  losses  of 
railway  promoters  and  investors.  But  this  doubt  regarding  the 
ultimate  incidence  of  such  a  tax  does  not  affect  the  conclusions 
pertinent  for  the  tariff  controversy.  For  a  long  time,  the  pur- 
chasers of  all  rails,  domestic  or  foreign,  paid  a  tax  because  of  the 
duty  on  the  foreign  article. 

With  the  decade  1 890-1 900,  however,  and  more  particularly 
with  the  years  1895  and  1896,  a  change  set  in.  The  lines  on  the 
chart  came  together.  The  American  price  fell  to  the  level  of  the 
British.  For  a  time  it  even  fell  appreciably  below  the  British 
level.  In  no  year  since  1895  has  it  been  appreciably  above  it. 
Taking  the  period  since  1895  as  a  whole,  the  American  price  has 
been  virtually  the  same  as  the  British.  It  has  been  very  steady, 
—  so  steady  as  to  point  to  an  agreement  of  some  sort  for  the 
maintenance  of  a  price.  But,  though  there  may  thus  be  evidence 
of  a  combination  or  trust,  the  price  situation  no  longer  shows  any 
influence  of  the  tariff.  Here  again  the  protectionist  will  point 
with  pride,  and  this  time  with  pride  more  clearly  justified.  The 
object  of  protection  to  young  industries,  —  the  ultimate  fall  in 
price  to  the  foreign  level,  —  seems  to  have  been  attained. 


142        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

The  same  general  trend  would  appear  on  a  chart  showing  the 
course  of  pig-iron  prices  during  the  same  forty  years.  Such  a 
chart  would  be  less  simple,  and  would  need  more  explanation, 
than  that  for  steel  rails.  Grades  of  pig-iron  differ  in  the  two  coun- 
tries; continuous  price  figures  for  the  significant  grades  are  not 
easily  secured  for  the  entire  period;  and  allowance  has  to  be  made 
for  differences  of  quality.  For  these  reasons,  the  graphic  pre- 
sentation is  most  striking  in  the  case  of  steel  rails,  whose  quality  is 
as  homogeneous  as  can  be  the  case  with  any  commodity  and  whose 
prices  are  on  record  from  the  first  year  of  the  period  to  the  last. 
The  course  of  events  which  thus  is  sharply  defined  for  rails  is 
typical  of  what  has  happened  with  almost  all  the  cruder  forms  of 
iron  and  steel:  extraordinary  increase  of  domestic  production; 
domestic  prices  at  first  higher  than  the  foreign;  continuance  of 
imports  for  a  while,  then  their  cessation;  reduction  of  the  domes- 
tic price;  finally,  equality  of  price  for  the  foreign  and  the  Ameri- 
can products.  To  repeat,  the  outcome  seems  to  have  been 
precisely  that  predicted  by  the  advocates  of  protection  to  young 
industries.  True,  the  term  "  young  industries  "  is  rarely  applied 
to  such  a  giant  as  the  American  iron  industry.  But,  as  has  been 
pointed  out,  the  contention  that  protection  operates  in  the  end 
to  lower  prices  is  simply  the  young  industries  argument  in  a  differ- 
ent turn  of  phrase.1  Substantially  it  is  this  argument  which  has 
been  advanced,  and  which  seems  to  be  verified  by  the  actual 
course  of  events. 

Further  details  of  the  changes  in  the  iron  trade  are  shown  in  the 
appended  tables,  giving  year  by  year  the  domestic  product,  the 
imports,  the  prices  of  some  important  grades  of  iron  in  the  United 
States  and  Great  Britain.  It  will  be  of  service  to  consider  not 
only  the  general  sweep,  but  some  of  the  details. 

The  iron  industry  is  peculiarly  liable  to  the  periodic  fluctua- 
tions of  modern  industry.  Indeed,  it  reflects  in  the  extreme  the 
alternations  of  activity  and  depression  between  which  intervene 
the  recurring  commercial  crises.  The  explanation  of  this  special 
sensitiveness  is  not  far  to  seek.  The  periodicity  of  crises  is 
closely  associated  with  the  variations  in  the  spirit  of  investment. 

1  See  chapter  ii,  p.  19,  above. 


HOW  FAR  GROWTH  WAS  DUE   TO  PROTECTION      1 43 

In  so-called  good  times,  new  enterprises  of  all  sorts  are  freely 
launched.     In  the  succeeding  periods  of  dulness,  few  are  under- 
taken.    But  investment  and  fresh  ventures  in  our  modern  days 
mean  the  erection  of  plant,  tools,  and  machines;  and  these  mean 
iron  and  steel.     When  new  and  ever  new  railways  formed  the 
main  outlet  for  the  investment  of  the  rapidly  growing  accumula- 
tions of  savings,  it  was  inevitable  that  their  construction, —  rapid 
in  the  days  of  activity,  slow  and  halting  in  those  of  depression,  — 
should  cause  periods  now  of  urgent  demand  for  iron,  then  of 
glutted  markets.     Within  the  last  decade  or  two  the  railway  has 
become  relatively  less  important  in  new  investments;    but  the 
ever-growing  use  of  iron  and  steel  in  buildings,  ships,  tools  and 
machinery  of  all  kinds,  has  caused  the  oscillations  in  the  iron 
trade  to  persist.     Naturally,  these  phenomena  are  accentuated 
in  the  United  States,  where  material  progress  is  rapid  beyond 
comparison  and  where  the  investment  of  capital  proceeds  fast 
and  feverishly.     Hence  we  find  that  with  every  rising  wave  of 
enterprise  and  investment  the  price  of  iron  rises,  and  its  produc- 
tion mounts  with  sudden  rapidity.      Then  comes  the  crisis: 
prices  fall,  production  halts,  and  a  period  of  depression  follows, 
more  or  less  long  according  as  the  conditions  for  revival  appear 
later  or  sooner.     Not  infrequently,  the  iron  industry  feels  a  chill 
before  the  commercial  storm  breaks.     A  slackening  in  the  launch- 
ing of  new  enterprises  naturally  appears  as  some  among  the  en- 
terprises already  set  up  begin  to  weaken  under  the  test  of  active 
operation.      Hence  the  maximum  production  of  iron  and  the 
highest  range  of  prices  for  the  cycle  sometimes  come  in  the  year 
immediately  preceding  the  crash.      In  1872-73,  it  is  true,  the 
largest  production  and  the  highest  price  came  in  the  year  of  the 
crisis  itself,  in  1873.      Before  the  disturbances  of  1884  and  of 
1893,  however,  a  relaxation  in  the  rate  of  output  and  the  begin- 
ning of  a  fall  in  prices  are  seen  in  advance  of  the  general  overturn. 
During  the  first  decade  of  the  present  century,  no  such  premoni- 
tory symptoms  seem  to  have  appeared.     The  output  of  pig-iron 
rose  without  a  check  until  the  crisis  of  1903  set  in,  and  even  more 
steadily  up  to  the  great  crisis  of  1907. 


144        SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

A  glance  at  the  tables  will  show,  again,  that  during  the  earlier 
part  of  the  period  under  consideration,  —  until  about  1890,  — 
the  imports  of  pig-iron  responded  regularly  to  the  increasing 
demands  of  the  active  periods,  and  fell  as  regularly  during  the 
dull  times  that  followed.  Throughout  the  greater  part  of  the 
nineteenth  century  the  domestic  supply  of  iron  needed  to  be 
regularly  supplemented  by  imports;  and  in  the  years  1871-72 
there  was  simply  a  somewhat  increased  resort  to  a  regular  foreign 
supply.  But,  as  the  domestic  product  became  larger,  the  im- 
ports became  less  and  less  important,  and,  except  in  the  years  of 
rising  speculation  and  investment,  virtually  ceased.  It  is  true 
that  the  custom-house  returns  show  continuous  and  considerable 
imports  throughout  the  period.  But  the  case  is  one  of  those 
where  special  qualities  continue  to  be  imported,  giving  no  indica- 
tion of  the  relation  between  foreign  and  domestic  prices  for  the 
grades  chiefly  used.  Thus  in  the  decade  1870-80,  and  even  later, 
Scotch  pig-iron  was  imported  in  considerable  quantities,  being 
thought  specially  adapted  for  certain  kinds  of  smooth  castings, 
and  so  bought  abroad  in  the  face  of  a  duty  which  advanced  its 
price  beyond  that  of  domestic  iron.  In  later  years  southern  iron 
was  found  available  for  these  purposes,  and  the  importation  of 
the  Scotch  brand  ceased.  Similarly,  spiegel-eisen  and  ferro- 
manganese,  —  classed  with  the  ordinary  kinds  of  pig-iron  in  the 
custom-house  returns,  —  continued  throughout  to  be  imported 
in  varying  quantities.  These  are  used,  in  comparatively  small 
amounts,  solely  for  mixture  with  ordinary  iron  in  the  last  stages 
of  conversion  into  steel.1  Setting  aside  such  special  cases,  imports 
practically  ceased  in  the  dull  periods  of  1875-78,  and  again  in 
1884-85.  On  the  other  hand,  they  revived,  and  became  of  con- 
siderable volume  in  the  active  years  1879-82,  and  again  in  the 
year  1886-87.  After  this  latter  period,  however,  they  ceased  to 
come  in,  even  during  the  periods  of  activity.  The  year  1890, 
when  first  the  American  iron  product  exceeded  that  of  Great 
Britain,  marks  also  the  end  of  this  spasmodic  competition.    With 

1  The  production  of  these  special  brands  varies  greatly,  within  the  country  and 
without,  apparently  from  the  sporadic  and  easily  exhausted  pockets  of  the  peculiar 
ore.  But  the  domestic  production,  on  the  whole,  has  been  rapidly  increasing.  See 
the  Report  of  the  American  Iron  and  Steel  Association  for  i8g8,  p.  40. 


HOW  FAR  GROWTH  WAS  DUE   TO  PROTECTION      1 45 

that  year  the  revolution  in  the  iron  trade  of  the  United  States 
was  virtually  accomplished,  and  the  new  stage  was  entered  on. 

During  the  years  of  activity  preceding  1890  —  1872-73,  1879- 
82,  1886-87  —  the  price  of  iron  in  the  United  States  was  at  the 
seaboard  higher  than  the  price  in  Great  Britain  by  the  full  amount 
of  the  duty.  This  much  the  fact  of  importation  suffices  to  prove. 
At  other  times  iron  did  not  come  in,  —  that  is,  only  certain  special 
qualities  came  in;  and  the  American  price,  while  higher  than  the 
foreign,  was  not  higher  by  the  full  amount  of  the  duty.  The 
tables  of  prices  amply  verify  these  statements.  In  the  busy 
years  the  difference  between  American  and  British  prices  was 
large  enough  to  offset  duty,  freight,  and  other  charges;  and  im- 
ports flowed  in.  In  dull  years  the  margin  shrank;  and  imports 
ceased,  except  for  the  special  qualities.  Until  1893  the  American 
public  had  to  pay  roundly,  sometimes  the  full  amount  of  the 
duty,  sometimes  less,  but  always  a  very  substantial  added  price, 
for  the  eventual  gains  which  might  be  credited  to  the  protective 
system. 

A  precise  measurement  of  this  burden  has  sometimes  been 
attempted.  Following  the  simplest  lines  of  reasoning,  it  has 
been  argued  that  the  total  domestic  production,  multiplied  by 
the  rate  of  duty,  would  gauge  accurately  the  added  charge  on  the 
community.1  The  dangers  of  the  hasty  application  of  deductive 
reasoning  could  not  be  better  illustrated  than  by  the  comparison 
of  this  version  of  the  situation  with  the  facts.  Had  there  been  no 
duty  on  iron,  the  price  at  the  seaboard  would  unquestionably 
have  been  lower  than  it  was,  —  at  times  by  the  full  amount  of  the 
duty,  at  other  times  by  less.  The  price  in  the  interior,  say  at  Pitts- 
burgh, also  would  probably  have  had  a  somewhat  lower  range; 
but  how  much  lower  it  is  impossible  to  say.  The  freight  charges 
from  the  seaboard  would  have  impeded  competition  from  im- 
ported iron,  raising  the  price  at  which  it  could  then  be  supplied. 
The  iron  output  west  of  the  Alleghanies  was  being  made  more  and 
more  cheaply  and  sold  more  and  more  cheaply,  as  the  years  went 
on;  and  the  free  admission  of  iron,  while  it  might  have  caused 
prices  to  be  lower,  would  at  no  time  after  1882  or  1883  have 

1  See  the  Appendix  to  D.  A.  Wells's  Recent  Economic  Changes,  pp.  469,  470. 


I46         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

caused  a  decline  in  the  heart  of  the  country  by  the  full  amount  of 
the  duty  in  force.     Indeed,  in  the  latter  part  of  this  decade  — 
1888  or  1889  —  the  price  in  this  region  was  little  higher,  if  at  all, 
than  that  at  which  foreign  iron  could  have  been  supplied,  duty 
free.     And,  further,  even  admitting  that  domestic  prices  were 
much  higher  than  foreign,  it  is  probable  that  the  removal  of  the 
duty  and  the  consequent  demand  on  Great  Britain  for  iron  would 
have  caused  the  price  of  British  iron  to  go  up.     The  level  of  prices 
would  indeed  have  been  the  same  in  the  two  countries  (allowing 
for  freight  and  the  like) ;  but  it  would  have  been  higher  than  the 
foreign  level  which  in  fact  prevailed.      A  great  increase  in  the 
demand   on  the  British  iron  masters  for  iron,  consequent  on 
the  absence  of  the  American  duty  and  the  lessening  of  American 
product,  might  have  raised  the  price  in  Great  Britain,  not  only 
temporarily,  but  over  the  whole  period.     During  the  first  decade 
of  the  period,  say  until  the  year  1880,  it  is  not  unlikely  that  Great 
Britain  could  have  sent  to  the  United  States  all  the  iron  that 
would  have  been  imported  there,  if  free  of  duty,  without  such 
pressure  on  the  British  coal  and  iron  mines  as  to  have  caused 
enhanced  cost  and  permanently  enhanced  prices.     But  with  the 
extraordinary  increase  in  the  American  demand  after  1880,  the 
additional  quantity  could  not  have  been  supplied  from  Great 
Britain  except  on  harder  terms.      The  price  of  iron  in  Great 
Britain  would  have  risen  in  face  of  so  great  an  addition  to  the 
annual  demand,  and  the  common  international  level  would  have 
been  somewhat  higher  than  the  British  price  was  in  the  absence 
of  this  demand. 

A  different  question  concerns  the  effect  of  the  tariff  system,  — 
still  during  this  earlier  period,  until  about  1890, — on  the  range 
of  the  periodic  fluctuations.  The  sources  of  supply  were  nar- 
rowed. The  differences  between  highest  and  lowest  prices  were 
greater  than  they  would  have  been  without  a  duty  or  with  lower 
duties.  When  a  "  boom  "  came,  the  domestic  iron  which  was  on 
hand,  or  was  obtainable  promptly  from  furnaces  in  blast,  soared 
in  price  to  the  importing  level.  The  abrupt  and  great  rise  in  price 
tempted  equally  abrupt  and  great  increase  in  the  building  of  new 
iron  furnaces,  with  the  consequence  that,  when  the  boom  collapsed 


HOW  FAR  GROWTH  WAS  DUE  TO  PROTECTION      1 47 

and  the  demand  fell,  a  large  supply  from  the  increased  number  of 
furnaces  was  on  the  market,  and  caused  prices  to  fall  as  sharply 
as  they  had  been  before  sharply  raised.  This  is  but  an  illustra- 
tion of  a  simple  principle:  the  wider  the  range  of  the  sources  of 
supply,  the  greater  the  steadiness  of  prices.  Fluctuations  of  the 
same  general  sort  there  would  have  been  in  any  case:  the  price  of 
iron  in  all  the  great  countries  rises  and  falls  in  sympathy  with 
general  industrial  conditions.  But  interplay  between  the  mar- 
kets of  different  countries,  under  a  system  of  free  exchange,  would 
have  mitigated  in  some  degree  the  extent  of  the  oscillations.1 
The  extremes  were  made  wider  apart  in  the  United  States  by  the 
protective  regime;  and  so  another  count  is  added  to  the  indict- 
ment which  its  opponents  may  fairly  bring  against  it. 

But,  to  repeat,  the  protectionist  may  point  with  pride  to  the 
final  outcome.  In  the  end  his  object  was  attained:  the  industry 
became  self-sufficing,  needed  no  further  props,  eventually  sup- 
plied its  product  as  cheaply  as  could  be  done  by  the  now  fairly 
beaten  foreigner. 

The  uncompromising  advocate  of  free  trade  has  but  one  reply 
to  make:  that  the  same  result  would  have  come  about  in  any 
case.  He  may  maintain  that  it  is  a  case  of  post  hoc  ergo  propter. 
The  protectionist  assumes  that  his  policy  was  necessary  to  bring 
the  iron  industry  to  maturity.  No:  it  would  have  grown  as  fast 
and  as  far  without  protection.  And  this  rejoinder  is  not  without 
show  of  reason.  To  weigh  its  probative  force,  we  must  consider 
again  the  main  factors  that  have  led  to  the  victorious  progress  of 
the  industry. 

The  mode  in  which  the  great  iron  ore  deposits  of  Lake  Superior 
were  utilized  has  already  been  described.  The  main  factor  which 
promoted  their  development  was  improved  transportation,  mak- 

1  That  such  an  interplay  would  have  lessened  the  fluctuations  in  prices  is  made 
more  probable  by  the  fact  that  the  ups  and  downs  of  industrial  activity  are  not 
precisely  synchronous  in  the  international  sphere.  The  speculative  revival  in  1870- 
73  began  in  England  and  on  the  Continent  earlier  than  in  the  United  States.  The 
American  revival  in  1879-80,  on  the  other  hand,  preceded  the  European,  as  did 
also  that  of  1886-87.  In  1889-90  —  certainly  so  far  as  iron  went  —  the  European 
demand  again  showed  renewed  strength  earlier  than  the  American;  and  the  same 
was  true  in  the  period  1897-99. 


148         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

ing  rich  natural  resources  available  that  would  have  been  thought, 
a  generation  before,  too  distant  for  use.  The  cheapening  in  the 
carriage  of  ore  and  coal,  however,  was  simply  one  phase,  —  an 
important  one,  but  by  no  means  a  dominant  one,  —  in  the  general 
cheapening  of  carriage  by  rail  and  water.  The  immense  area 
over  which  free  trade  was  permanently  assured,  the  mechanical 
genius  and  commercial  enterprise  of  the  people,  the  possibilities 
of  fortune-building  through  the  exploitation  of  the  great  western 
country,  —  such  were  the  impelling  forces  by  which  the  means  of 
transportation  were  driven  to  their  high  stage  of  efficiency.  The 
protective  system  can  claim  no  credit  for  this  result.  The  ad- 
vance appeared  in  the  apparatus  for  international  trade  as  well 
as  in  that  for  domestic,  and  in  domestic  trade  such  as  would  have 
existed  without  protection  as  well  as  in  that  fostered  by  protec- 
tion. And  this  was  probably  the  one  factor  which,  acting  in 
conjunction  with  the  great  natural  resources,  counted  for  most 
in  promoting  the  growth  of  the  iron  industry.  Through  it  that 
industry  in  the  United  States,  so  far  from  having  to  deal  with 
ores  of  no  special  excellence  and  obdurate  and  limited  fuel,  was 
able  to  bring  together  unlimited  supplies  of  both  materials  on 
easy  terms  and  in  perfect  quality.  How  much  such  easy  com- 
mand of  proper  materials  tells  is  shown  by  the  growth  of  the  iron 
manufacture  in  Alabama  and  the  adjoining  southern  region. 
Here  the  close  contiguity  of  coal  and  iron  caused  a  great  industry 
to  develop  in  the  face  of  difficult  social  conditions  and  of  the  com- 
petition of  the  strong  and  comparatively  old  industry  in  Pennsyl- 
vania. The  cheapening  of  transportation  gave  Pennsylvania 
herself  the  equivalent  of  contiguous  ore  and  coal,  and  was  the 
main  element  in  promoting  the  advance  of  her  iron  industry  also. 
Yet  it  must  be  admitted  that  other  causes  also  had  their  effect, 
such  as  improvements  at  the  mines  and  at  the  furnaces  and  iron 
works.  At  the  mines,  whether  deep-worked  or  open-cut,  the 
organization,  the  engineering,  the  machinery  became  better  and 
better.  The  ores  were  systematically  sampled  and  analyzed, 
their  chemical  and  physical  constitution  ascertained,  and  the 
various  kinds  carefully  assorted  for  different  uses  or  mixed  in  the 
most  advantageous  combinations.     At  the  iron  and  steel  works 


HOW  FAR  GROWTH  WAS  DUE  TO  PROTECTION      1 49 

the  discoveries  of  applied  science  were  before  long  systematically 
turned  to  account.  Forty  years  ago  the  blast  furnaces  and  iron 
works  of  the  United  States  were  behind  those  of  Great  Britain 
in  their  technology.  Matters  went  much  by  rule  of  thumb.  The 
ore  and  coal  and  flux  were  dumped  into  the  furnace,  and  the  prod- 
uct marketed  as  it  chanced  to  turn  out.1  As  time  went  on,  the 
American  works  were  no  longer  backward  in  the  application  of 
the  best  scientific  processes.  The  economies  from  production  on 
a  large  scale,  —  these  being  partly  from  the  better  organization  of 
labor,  partly  from  better  technical  appliances,  —  probably  were 
secured  more  fully  in  the  American  establishments  than  in  Euro- 
pean. These  were  improvements  in  the  iron  industry  itself,  such 
as  might  be  with  some  reason  ascribed  to  the  stimulus  given 
by  protective  legislation. 

Here  again,  however,  we  are  dealing  with  causes  whose  opera- 
tion was  not  confined  to  the  iron  industry  or  the  protected  indus- 
tries in  general.  In  part,  they  were  of  world-wide  effect.  All 
countries  shared  in  the  advances  of  the  arts  and  the  triumphs  of 
applied  science.  True,  in  our  own  country  special  industrial 
excellence  was  achieved  in  many  directions;  but  not  solely  or 
peculiarly  in  the  protected  industries.  American  mining  engi- 
neers pushed  their  art  with  signal  success  in  coal  mines  and  in 
mines  for  the  precious  metals,  as  well  as  in  copper  and  iron  mines. 
No  more  remarkable  achievements  were  made  than  in  electrical 
engineering,  where  a  nurturing  shelter  from  foreign  competition 
cannot  possibly  be  supposed  to  have  played  a  part.  An  impor- 
tant cause  throughout  the  industrial  field  was  unquestionably 
the  wonderful  growth  of  technical  and  scientific  education.  The 
supply  of  intelligent  and  highly  trained  experts,  to  whom  the 
management  of  departments  and  separate  establishments  could 
be  intrusted  with  confidence,  facilitated  the  process  of  consolida- 
tion and  the  organization  on  a  grand  scale  of  widely  ramifying 
enterprises.     It  may  be  a  question  how  far  our  scientific  schools 

1  See  an  instructive  article  by  J.  S.  Newberry  in  the  International  Review  for 
November,  1874,  i,  especially  pp.  778-780,  where  it  is  pointed  out  that  at  that 
date  "  the  ingenious,  enterprising,  and  energetic  Americans  "  were  still  "  far  out- 
done by  their  English  relatives." 


150        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

and  institutes  of  technology  have  been  successful  in  stirring 
invention  and  developing  initiative  talent.  The  prime  essential 
for  leadership  seems  to  be  here,  as  elsewhere  in  the  intellectual 
world,  inborn  capacity.  But  the  rapid  spread  and  complete 
utilization  of  the  best  processes  were  greatly  promoted  by  them. 
They  were  largely  instrumental  in  enabling  advantage  to  be 
taken  of  chemical,  metallurgical,  and  mechanical  improvements 
in  the  iron  and  steel  works.  Their  influence  showed  itself  no  less 
in  the  railways,  the  great  commercial  and  manufacturing  plants, 
the  textile  works,  manufacturing  establishments  at  large.  Their 
influence  in  permeating  all  industry  with  the  leaven  of  scientific 
training  was  strengthened  by  the  social  conditions  which  enabled 
them  to  attract  from  all  classes  the  plentiful  supply  of  mechanical 
talent.  Hence  American  industry  showed  not  only  the  inventive- 
ness and  elasticity  characteristic  of  the  Yankee  from  early  days, 
but  that  orderly  and  systematic  utilization  of  applied  science  in 
which  the  Germans  have  hitherto  been  —  perhaps  still  are  — 
most  successful.  The  rapid  accumulation  of  ample  capital  still 
further  facilitated  the  ready  trial  and  bold  adoption  of  new  and 
better  processes. 

On  such  grounds  as  these  it  might  be  alleged  that  the  iron  in- 
dustry would  have  advanced  during  the  forty  years  in  much  the 
same  way,  protection  or  no  protection.  And  yet  the  unbiased 
inquirer  must  hesitate  before  committing  himself  to  such  an  un- 
qualified statement  of  what  would  have  been.  Rich  natural 
resources,  business  skill,  improvements  in  transportation,  wide- 
spread training  in  applied  science,  abundant  and  manageable 
labor  supply,  —  these  perhaps  suffice  to  account  for  the  phe- 
nomena. But  would  these  forces  have  turned  in  this  direction  so 
strongly  and  unerringly  but  for  the  shelter  from  foreign  competi- 
tion ?  Beyond  question  the  protective  system  caused  high  profits 
to  be  reaped  in  the  iron  and  steel  establishments  of  the  central 
district;  and  the  stimulus  from  great  gains  promoted  the  un- 
hesitating investment  of  capital  on  a  large  scale.  During  the 
decade  1880-90  the  iron  output  in  the  Pittsburgh  district  and  the 
rest  of  the  central  region  served  by  the  Lake  Superior  ores  grew 
from  comparatively  modest  dimensions  to  independent  greatness. 


HOW  FAR  GROWTH  WAS  DUE  TO  PROTECTION     151 

Profits  were  good  in  all  these  years,  and  were  enormous  during 
the  periods  of  active  demand  in  1880-82  and  1886-87.  They 
continued  high  in  the  large  and  well-provided  establishments 
until  the  crash  of  1893.  The  mounting  output  was  the  unmis- 
takable evidence  of  profitable  investment.  Thereafter  the  com- 
munity began  to  get  its  dividend.  Prices  fell  in  the  manner 
already  described,  and  the  iron  industry  entered  on  its  new  stage. 
The  same  sort  of  growth  would  doubtless  have  taken  place 
eventually,  tariff  or  no  tariff;  but  not  so  soon  or  on  so  great  a 
scale.  With  a  lower  scale  of  iron  prices,  profits  would  have  been 
lower;  and  possibly  the  progress  of  investment,  the  exploitation 
of  the  natural  resources,  even  the  advance  of  the  technical  arts, 
would  have  been  less  keen  and  unremitting. 

No  one  can  say  with  certainty  what  would  have  been;  and  the 
bias  of  the  individual  observer  will  have  an  effect  on  his  estimate 
of  probabilities.  The  free  trader,  impatient  with  the  fallacies  and 
superficialities  of  current  protectionist  talk,  will  be  slow  to  admit 
that  there  are  any  kernels  of  truth  under  all  this  chaff.  What 
gain  has  come,  will  seem  to  him  a  part  of  the  ordinary  course  of 
progress.  On  the  other  hand,  the  firm  protectionist  will  find  in 
the  history  of  the  iron  trade  conclusive  proof  of  brilliant  success. 
And  very  possibly  those  economists  who,  being  in  principle 
neither  protectionists  nor  free  traders,  seek  to  be  guided  only  by 
the  outcome  in  the  ascertained  facts  of  concrete  industry,  would 
render  a  verdict  here  not  unfavorable  to  the  policy  of  fostering 
"  national  industry."  Few  persons,  whether  convinced  protec- 
tionists or  thinkers  of  would-be  judicial  spirit  or  plain  every-day 
business  men,  will  be  able  to  resist  the  appeal  to  national  pride. 
Mere  achievement  of  the  leading  place  among  the  world's  pro- 
ducers stirs  a  sense  of  triumph;  just  as  a  victory  on  the  battle- 
field, even  in  a  dubious  cause,  kindles  the  joy  of  conquest. 

The  history  of  the  iron  industry  in  Germany  during  the  same 
period  shows  similar  phenomena  and  raises  almost  the  same 
questions.  In  1879,  when  Germany  turned  from  a  system  not 
far  from  complete  free  trade  to  one  of  protection  both  for  manu- 
factures and  for  agriculture,  the  iron  industry  was  the  center  of 
attention  among  the  manufactures.     The  duty  on  pig-iron,  pre- 


152         SOME  ASPECTS  OF  THE   TARIFF  QUESTION 

viously  admitted  free,  was  made  10  marks  per  ton,  with  corre- 
sponding duties  on  other  forms  of  iron  and  steel;  not  a  high  rate  of 
protection  as  things  have  gone  in  the  United  States,  yet  substan- 
tial. During  the  twenty  years  after  that  date,  the  iron  industry 
of  Germany  developed  in  much  the  same  way  as  the  American: 
rapid  increase  of  domestic  production,  virtual  cessation  of  im- 
ports, decline  of  domestic  prices.  By  the  opening  of  the  twentieth 
century  the  German  industry,  as  has  already  been  noted,  passed 
that  of  England,  so  far  as  quantity  of  output  goes;  imports  be- 
came sporadic  and  comparatively  insignificant;  exports  became 
large  and  steady.  The  decline  in  prices,  it  is  true,  was  checked 
in  Germany  by  the  Kartells  in  the  iron  trade,  and  showed  itself 
to  the  full  only  during  the  years  when  these  combinations  were 
not  in  command  of  the  situation.  But  there  can  be  no  reasonable 
doubt  that  domestic  cost  and  competitive  domestic  price  were 
brought  down  to  a  level  as  low  as  the  British.  Moreover,  in 
Germany  as  in  the  United  States,  these  results  came  about  in 
unexpected  ways  and  in  consequence  of  technical  improvements 
whose  effect  had  not  been  foreseen.  What  the  Bessemer  process 
proved  to  be  for  the  iron  trade  of  the  United  States,  the  Thomas- 
Gilchrist  (or  basic)  process  proved  for  that  of  Germany.  It  made 
possible  the  utilization  for  steel  making  of  the  enormous  iron  ore 
deposits  of  Luxemburg-Lorraine,  whose  high  phosphorus  content 
had  prevented  them  from  being  available  for  the  Bessemer 
method.  The  basic  process  had  just  been  perfected  at  the  time 
when  the  protective  tariff  of  1879  was  enacted;  but  the  leading 
German  iron  master  then  declared  that  it  would  prove  of  no 
advantage  to  his  country's  industry.  In  fact,  it  proved  the 
making  of  that  industry.  Because  of  it,  the  Luxemburg  ores 
could  be  carried  in  vast  quantities,  largely  by  water  (the  Wesel 
and  Rhine),  to  the  great  coal  region  of  the  lower  Rhine,  which 
became  an  iron  making  district  comparable  in  size  and  influence 
to  that  of  Pittsburgh.  Technical  advance  in  the  strictly  convert- 
ing and  manufacturing  processes  took  place  in  Germany  at  least 
as  rapidly  and  effectively  as  in  other  countries.  There,  as  in  the 
United  States,  the  wide  application  of  exact  scientific  methods 
was  promoted  by  the  diffusion  of  technological  training;   while 


HOW  FAR  GROWTH  WAS  DUE   TO  PROTECTION      1 53 

originating  and  inventive  science  progressed  in  a  manner  to  com- 
mand the  admiration  of  the  world.  The  German  iron  industry 
grew  from  youth  to  robust  and  energetic  manhood.1 

The  argument  for  protection  to  young  industries  was  put  for- 
ward more  unequivocally  in  Germany  than  in  the  United  States. 
For  both  countries,  it  might  indeed  have  been  contended  that  the 
stage  for  nurturing  protection  had  been  of  earlier  date  and  had 
already  been  passed  by  1870-80;  for  in  both  the  transition  from 
the  comparatively  primitive  methods  of  charcoal  iron  making  to 
the  methods  of  the  modern  iron  trade  had  been  accomplished 
long  before.2  None  the  less,  there  is  a  prima  facie  case  for  the 
protectionist,  —  again  an  apparent  confirmation  of  the  validity 
of  the  young  industries  argument, —  from  the  nature  and  extent 
of  the  industrial  development  during  the  last  two  decades  of  the 
nineteenth  century.  And  yet,  for  Germany  as  well  as  for  the 
United  States,  the  same  doubt  may  be  expressed:  would  not  all 
this  growth  have  taken  place  in  any  case  ?  Would  not  the  basic 
process  in  Germany  (perfected  as  it  was  before  the  duty  was  put 
on)  have  solved  in  any  case  the  problem  how  to  use  the  Luxem- 
burg ores  ?  In  some  respects  the  question  seems  to  call  for  an 
affirmative  answer  in  Germany  even  more  than  in  the  United 
States;  since  in  Germany  not  only  the  great  coal  supplies  but 
those  of  ore  also  were  familiarly  known,  and  no  exploration  for 
new  resources  could  play  a  part,  as  in  the  case  of  our  own  ore 

1  A  careful  and  detailed  survey  of  the  development  of  the  German  iron  industry- 
is  given  by  G.  Goldstein,  in  a  series  of  articles  published  in  the  V  erhandlungen  des 
Vereins  zur  Beforderung  des  Gewerbefleisses,  Berlin,  1908-09.  An  excellent  brief 
account,  with  extracts  from  the  speeches  of  those  who  advocated  protection  to  the 
iron  industry  because  "  young,"  is  in  the  same  author's  paper,  Der  deutsche  Eisen- 
zoll;  Ein  Erziehungszoll,  Volkwirtschajtliche  Zeitfragen,  Berlin,  191 2.  On  later 
developments,  among  them  the  growing  importation  of  ore,  see  an  article  by  E. 
Giinther,  in  Schmoller's  Jahrbuch,  Heft  3,  1914. 

2  Professor  M.  Sering  in  his  Gcschichte  der  Preussisch-Deutschen  Eisenzblle  von 
1818  zur  Gegenwart  (Schmoller's  Forschungen,  iv)  traces  the  history  of  protection 
to  iron,  with  special  regard  to  the  period  1840-70,  and  concludes  that  in  this  earlier 
period  there  was  successful  application  of  protection  to  young  industries;  intimat- 
ing also  that  the  German  iron  industry  was  well  on  its  feet  when  he  wrote  (1882) 
and  that  there  was  no  good  ground  for  duties  as  high  as  those  enacted  in  1879. 
Compare,  for  the  United  States  before  the  civil  war,  what  I  have  said  in  my  Tariff 
History  of  the  United  States,  pp.  1 23  seq. 


154        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

deposits  on  Lake  Superior.  And  would  not  German  science,  and 
German  methodical  application  of  science,  have  pursued  the 
same  forward  course;  would  not  the  same  spirit  of  victorious 
enterprise  have  led  to  the  upbuilding  of  great  manufacturing 
industries  ? 

To  such  questions  no  certain  answers  can  be  given.  It  is 
impossible  to  prove  which  is  the  right  solution  of  the  economic 
problem.  To  reach  anything  like  a  well  grounded  conclusion 
would  call  for  a  consideration  of  all  the  causes  of  economic  prog- 
ress; and  this  in  turn  for  a  consideration  of  progress  of  every 
kind,  intellectual,  moral,  political.  What  has  brought  about  the 
extraordinary  industrial  advance  of  Germany  since  the  war  of 
1870  ?  the  no  less  extraordinary  advance  of  the  United  States 
since  our  civil  war  ?  Those  whose  attention  is  centered  on  the 
protective  controversy  invariably  ascribe  too  much  to  this  one 
factor.  They  fail  to  perceive  that  the  phenomena  are  large  and 
complex.  I  am  disposed,  for  myself,  to  believe  that  other  factors 
were  much  more  important  than  the  protective  tariffs  of  either 
country;  not  only  the  other  economic  factors  which  have  been 
described  in  the  preceding  pages  as  regards  the  United  States,  but 
all  the  influences  of  the  social  environment.  In  both  countries, 
and  especially  in  Germany,  the  spirit  of  industrialism  and  capi- 
talism permeated  the  community  as  never  before.  The  spirit  of 
boldness  engendered  by  great  victorious  wars  may  be  fairly  sup- 
posed to  have  had  its  part  in  stimulating  boldness  in  the  con- 
quests of  peace  also.1     If  it  is  difficult  in  the  highest  degree  to 

1  I  venture  to  reprint  here  some  passages  from  my  presidential  address  of  1904 
before  the  American  Economic  Association,  on  the  "  Present  Position  of  the  Doc- 
trine of  Free  Trade,"  Papers  and  Proceedings  of  the  Seventeenth  Annual  Meeting, 
pp.  54  seq. 

"  Not  only  the  spirit  of  freedom  and  enterprise  within  the  community  has  its 
effect,  but  that  spirit  with  reference  to  other  communities  also.  The  political 
position  of  a  country  and  its  martial  success  seem  to  have  a  reflex  effect  on  the 
industrial  success  of  its  citizens  in  time  of  peace. 

"  Here  the  recent  development  of  Germany  is  apposite.  Her  industrial  ad- 
vance during  the  last  thirty  years  [1870-1900]  is  one  of  the  striking  phenomena  of 
our  time,  and  leads  naturally  to  speculation  as  to  its  causes.  No  doubt  these 
causes  are  varied,  as  in  all  such  cases.  The  thorough  organization  of  popular  edu- 
cation and  of  scientific  education  is  one  cause.  The  stimulating  effect  of  free  trade 
within  the  country,  as  established  by  the  Zollverein  since  1834,  is  another:   though 


HOW  FAR  GROWTH  WAS  DUE   TO  PROTECTION      1 55 

measure  with  precision  the  effects  of  the  strictly  economic  fac- 
tors, such  as  the  protective  tariff,  how  much  more  difficult  is  it  to 
gauge  those  of  the  great  underlying  social  and  spiritual  forces  ! 

Discussions  like  these  bear  on  still  another  general  topic,  one 
which  has  much  engaged  the  attention  of  economists:  the 
method  of  investigation  appropriate  for  their  subject,  and  more 
particularly  the  extent  to  which  historical  and  statistical  inquiry 
can  contribute  to  the  elucidation  of  principles.  The  economists 
of  Ricardo's  school  were  wont  to  say  that  a  conclusion  as  to  the 
effects  of  protection  could  be  reached  only  by  deductive  reasoning, 
such  as  was  commonly  used  by  them.  John  Stuart  Mill,  in  his 
statement  of  the  method  proper  in  the  social  sciences,  treated  this 

this  gain  had  been  enjoyed  by  France  throughout  the  nineteenth  century,  and 
by  England  for  centuries  before.  Much  is  due  to  the  whole  change  in  the  political 
and  social  atmosphere  which  came  with  the  crumbling  of  petty  absolutism,  and 
which  was  consummated  with  the  foundation  of  the  German  Empire.  But  to  all 
this  must  be  added  the  new  spirit  which  came  over  the  country  after  the  war  of 
1870.  Germany  emerged  from  the  conflict  with  a  new  sense  of  strength  and  confi- 
dence. The  new  feeling  communicated  itself  to  the  field  of  peaceful  industry. 
Vigor,  enterprise,  and  boldness  showed  themselves.  Large  enterprises  in  new 
fields  were  launched  and  successfully  conducted,  and  great  captains  of  industry 
came  to  the  fore.  A  spirit  of  conquest  in  all  directions  seems  to  have  spread 
through  the  people,  bred  or  at  least  nurtured  by  the  great  military  conquest  of  the 
Franco-German  war. 

"  Is  it  fanciful  to  suppose  that  consequences  of  the  same  sort  have  appeared  in 
other  countries  also  after  victorious  wars  ?  England  emerged  from  the  Napoleonic 
wars  with  a  great  feeling  of  pride  and  power.  She  alone  had  never  yielded  to  the 
great  conqueror.  The  period  which  followed  was  that  of  her  most  sure  and  rapid 
economic  advance.  She  then  established  the  hegemony  in  the  industry  of  the 
civilized  world  which  she  maintained  through  the  century.  The  northern  part  of 
the  United  States,  after  the  civil  war,  felt  a  similar  impulse.  That  struggle  had 
been  on  a  greater  scale  than  was  dreamed  of  at  the  outset,  and  its  outcome  proved 
the  existence  of  unexpected  power  and  resource.  It  is  probably  no  accident  that 
the  ensuing  years  showed  a  spirit  of  daring  in  industry,  and  sudden  and  successful 
activity  in  commercial  enterprises. 

"  No  one  is  more  opposed  than  I  am  to  all  that  goes  with  war  and  militarism. 
It  is  with  reluctance  that  I  bring  myself  to  admit  that  the  same  spirit  which  leads 
to  success  in  war,  may  also  lead  to  success  in  the  arts  of  peace.  Yet  so  it  seems 
to  be.  Men  being  what  they  are,  nothing  rouses  them  so  thoroughly  as  fighting. 
The  temper  which  then  pervades  a  community,  communicates  itself  by  imitation 
and  emulation,  and  shows  itself  in  all  the  manifestations  of  its  activity.  A  great 
war  lifts  the  minds  of  men  to  large  undertakings,  and  takes  its  place  with  other 
factors  in  stimulating  the  full  exercise  of  the  powers  of  every  individual." 


156         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

problem  as  a  typical  one,  and  set  forth  the  difficulties  of  disen- 
tangling the  effects  of  tariff  policy  from  those  of  other  forces 
operating  on  a  country's  prosperity.1  But  in  our  own  time,  Pro- 
fessor Schmoller  has  questioned  the  validity  alike  of  the  general 
theorem  and  of  the  particular  example.  Attentive  examination 
of  the  industrial  policy  and  history  of  this  or  that  country,  he 
maintains,  may  show  whether  or  no  protective  duties  serve  to 
promote  prosperity.2  Is  any  aid  on  the  question  of  method  to  be 
got  from  the  present  inquiry  as  to  the  duties  on  iron  in  the  United 
States  ? 

Certainly  the  statistical  and  historical  material  is  here  as  com- 
plete as  it  could  possibly  be  made.  The  elaborate  reports  of  the 
British  and  American  Iron  Associations,  the  publications  of  the 
Geological  Survey,  the  detailed  customs  statistics,  the  extensive 
technical  literature,  supply  information  as  full  and  detailed  as  the 
economist  can  hope  to  secure.  If  ever  the  inductive  method  is 
applicable,  here  is  an  opportunity. 

The  argument  for  protection  to  young  industries  has  been  con- 
sidered in  this  volume  on  the  assumption  that  the  immediate 
effect  of  protection  is  to  cause  a  national  loss,  —  one  measured, 
in  the  simplest  case,  by  the  volume  of  domestic  production  mul- 
tiplied by  the  rate  of  duty.  That  loss,  it  has  been  argued,  may 
be  offset  by  gain  at  a  later  stage;  at  the  outset,  however,  a  loss 
there  is.  But  as  has  already  been  noted,3  the  stanch  protectionist 
will  deny  this  in  toto.  There  never  is  a  loss.  The  community  is 
richer  from  the  start.     True,  the  prices  of  the  articles  taxed  may 

1  J.  S.  Mill,  Essays  on  some  Unsettled  Questions  of  Political  Economy,  p.  148;  see 
also  his  System  of  Logic,  Book  VI,  ch.  vii,  §§  2,  3,  4. 

2  In  the  article  "  Volkswirthschaft  "  in  the  Handworterbuch  der  Staatswissen- 
schaften,  reprinted  in  the  volume  Ueber  einige  Grundfragen  (1898),  Mill  is  referred 
to  as  trying  to  prove  his  theorem  "  with  the  inept  example  [groben  Beispiele]  that 
the  general  inquiry,  whether  a  system  of  protection  makes  a  country  rich,  can  lead 
to  no  result.  He  fails  to  see  that  he  puts  his  question  wrongly;  i.  e.,  in  terms  too 
general.  Specialized  investigations,  such  as  Sering's  on  the  German  iron  duties, 
Sombart's  on  the  tariff  policy  of  Italy,  and  others  of  recent  times,  show  that  in- 
quiries which  examine  properly  the  facts  in  detail  may  prove,  with  reasonable  cer- 
tainty, when  protective  duties  operate  to  promote  prosperity."  Ueber  einige 
Grundfragen,  p.  296.  Cf.  what  Schmoller  says  in  his  Grundriss,  ii,  Book  IV,  es- 
pecially pp.  647  seq.  (1st  edition). 

3  Chapter  ii,  p.  27. 


HOW  FAR  GROWTH  WAS  DUE   TO  PROTECTION      1 57 

for  a  while  be  higher.  But  a  home  market  springs  into  being  at 
once,  capital  previously  idle  finds  employment,  a  demand  for 
labor  is  created,  the  rate  of  wages  is  maintained  at  a  high  level. 
No  doubt,  all  such  familiar  disquisition  will  be  set  aside  sum- 
marily by  the  person  severely  trained  in  economics.  It  belongs 
to  the  A  B  C  of  the  subject;  and  the  proper  place  for  its  discus- 
sion is  the  elementary  class-room.  No  doubt,  too,  the  reasoning 
on  which  we  conclude  that  there  is  a  national  loss  is  in  its  essence 
very  simple.  It  is  but  a  common-sense  application  of  the  princi- 
ple of  the  division  of  labor,  a  simple  corollary  from  an  analysis  of 
the  gains  from  the  geographical  distribution  of  industry,  and 
perhaps  a  platitude  not  to  be  dignified  as  "  deductive  reasoning." 
And  yet,  when  we  meet  the  protectionist  on  his  own  ground,  this 
platitude  leads  to  some  reasoning  by  no  means  of  the  simplest 
sort.  Is  an  additional  market  really  created  by  protection  ?  Is 
there  employment  for  idle  capital,  or  only  transfer  of  capital  pre- 
viously employed  ?  Is  the  rate  of  wages  made  high  or  kept  high  ? 
The  reader  who  has  followed  the  voluminous  economic  literature 
which  German  scholarship  has  piled  up  in  recent  years  meets  not 
infrequently  the  contention  in  favor  of  Schutz  der  nationalen 
Arbeit.  Yet  often  he  is  left  in  doubt  just  how  and  why  national 
labor  is  to  be  shielded  by  protection,  —  whether  for  preventing 
sudden  shifts  in  the  historically  rooted  industries  of  a  slow- 
moving  people,  or  for  elevating  the  condition  of  labor  in  the  whole 
country.  Or,  to  take  another  example,  it  is  often  set  forth,  in  the 
same  quarters,  that  the  burdens  which  the  great  social  legislation 
of  Germany  imposes  on  her  employers  must  be  offset  by  duties 
on  the  products  of  competing  foreign  employers,  —  a  proposition 
to  which  the  stanch  protectionist  would  unhesitatingly  assent. 
But,  if  this  be  a  good  ground  for  compensating  duties,  why  is  not 
a  general  higher  range  of  wages  also  a  good  ground,  or  any  other 
condition  unfavorable  to  the  employer, — e.g.,  high  income  or 
property  taxes,  or  poorer  natural  advantages  ?  To  answer  these 
questions,  some  severe  reasoning  is  called  for:  plain  common- 
sense,  unsupported  by  sustained  argument  from  principle,  does  not 
suffice.  The  most  exhaustive  statistical  and  historical  inquiries, 
on  the  extent  of  the  home  market,  the  situation  of  domestic  labor, 


158         SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

the  amount  of  the  burdens  on  the  employer,  can  lead  us  to  no 
secure  result  until  we  have  not  only  grasped,  but  followed  into 
all  its  ramifications,  the  main  conclusions  concerning  the  effects  on 
national  prosperity  of  the  new  direction  of  the  productive  forces 
brought  about  by  tariff  restrictions. 

Similarly,  our  statistical  inquiry  on  the  American  iron  industry 
can  lead  us  directly  to  no  conclusion  on  the  old  and  perhaps  stale 
dispute  on  protection  and  free  trade.  The  initial  question  —  is 
there  a  national  loss  because  of  the  higher  price  of  the  dutiable 
article  ?  —  cannot  be  answered  from  facts  and  figures.  So  far 
Mill  and  his  associates  were  right.  The  effects  of  protection  on 
national  prosperity  cannot  be  discerned  by  examining,  however 
laboriously  and  critically,  the  facts  either  as  to  the  prosperity  of 
the  community  at  large  or  as  to  the  growth  of  protected  industries. 

If,  indeed,  this  much  be  settled,  —  if  the  conclusion  here  as- 
sumed with  regard  to  the  general  principle  be  accepted,  —  then 
the  next  stage  in  the  inquiry  assumes  a  different  form.  Professor 
Schmoller  has  remarked  that  inductive  and  deductive  reasoning 
are  as  indispensable  each  to  the  other  as  the  right  foot  in  walking 
is  to  the  left.1  For  the  particular  sort  of  economic  problem  here 
under  consideration  the  analogy  holds  perfectly.  A  long  step 
forward  must  first  be  taken  by  deduction  alone,  —  that  is,  by 
reasoning  from  premises  established  through  very  simple  obser- 
vation. But  thereafter  both  laborious  digging  at  the  facts  and 
their  critical  interpretation  in  the  ligh  t  of  familiar  premises  must 
proceed  side  by  side.  Even  so,  as  has  just  been  remarked,  there 
may  be  almost  insuperable  difficulty  in  the  way  of  reaching  a 
firmly-grounded  result.  And  in  any  case,  for  the  settlement  of 
the  underlying  questions  of  principle  we  are  still  compelled  to 
rely  mainly  on  general  reasoning  from  simple  premises. 

1  Grundfragen,  p.  293. 


HOW  FAR  GROWTH  WAS  DUE  TO  PROTECTION     1 59 


TABLE  I 

Production,  Imports,  Exports  of  Pig-Iron,  1870-19121 


Calendar  Year 

Production 

Imports 

Exports 

1870 

1,665,179 

1871 

1,706,793 

219,228 

2,097 

1872 

2,548,713 

264,256 

1,329 

1873 

2,560,963 

138,132 

9,092 

1874 

2,401,262 

54,612 

14,320 

1875 

2,023,733 

74,939 

7,864 

1876 

1,868,961 

74,i7i 

3,424 

1877 

2,066,594 

59,697 

6,918 

1878 

2,301,215 

66,504 

2,957 

1879 

2,741,853 

304,171 

i,i53 

1880 

3,835,191 

700,864 

1,886 

1881 

4,144,254 

465,031 

6,207 

1882 

4,623,323 

54o,i59 

5,620 

1883 

4,595,510 

322,648 

3,798 

1884 

4,097,868 

184,269 

3,870 

1885 

4,044,526 

146,740 

6,277 

1886 

5,683,329 

361,768 

8,919 

1887 

6,417,148 

467,522 

6,850 

1888 

6,489,738 

197,237 

14,489 

1889 

7,603,642 

148,759 

13,681 

1890 

9,202,703 

134,955 

16,471 

1891 

8,279,870 

67,179 

14,946 

1892 

9,157,000 

70,125 

15,427 

1893 

7,124,502 

54,394 

24,587 

1894 

6,657,388 

15,582 

24,482 

189S 

9,446,3o8 

53,232 

26,164 

1896 

8,623,127 

56,272 

62,071 

1897 

9,652,680 

19,212 

262,686 

1898 

n,773,934 

25,152 

253,057 

1899 

13,620,703 

40,372 

228,678 

1900 

13,789,242 

52,565 

286,687 

1901 

15,878,354 

62,930 

81,211 

1902 

17,821,307 

6i9,354 

27,487 

1903 

18,009,252 

599,574 

20,379 

1904 

16,497,033 

79,5oo 

49,025 

I9°5 

22,992,380 

212,466 

49,221 

1906 

25,307,19! 

379,828 

83,317 

1907 

25,781,361 

489,475 

73,703 

1908 

15,936,018 

92,202 

46,696 

1909 

25,795,471 

176,442 

62,989 

1910 

27,303,567 

237,233 

127,385 

1911 

23,649,547 

148,459 

120,799 

1912 

29,726,937 

129,325 

272,676 

1  The  figures  are  derived  from  the  American  Iron  and  Steel  Association  Reports.    They  are  for 
gross  tons  (2,240  lbs.). 


^^ 


1 60         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 


TABLE  II 


Prices  of  Pig-Iron  in  the  United  States  and  in  Great  Britain, 

1873-1912  * 


Gray  forge 

Cleveland 
(Great  Britain) 

Bessemer 

West  Coast 

Year 

Pittsburgh 

Pittsburgh 

Bessemer 

(U.  S.) 

(U.  S.) 

(Great  Britain) 

1873 

$35-8o 

$27.95 

1874 

27.16 

18.13 

1875 

23.67 

14.61 

1876 

21.74 

12.86 

1877 

20.60 

11.06 

1878 

18.09 

10.28 

1879 

22.15 

10.02 

1880 

27.98 

12.26 

1881 

22.94 

9-47 

1882 

23.84 

10.58 

1883 

19.04 

9-55 

1884 

17.17 

8.87 

1885 

15-27 

7-99 

1886 

16.58 

7-43 

$18.96 

$10.60 

1887 

19.02 

8.27 

21.37 

11.22 

1888 

15-99 

7-93 

I7-38 

IO.86 

1889 

15-37 

10.60 

18.00 

12.68 

1890 

15-78 

11.64 

18.85 

13.80 

1891 

14.06 

9.76 

15-95 

II.80 

1892 

12.81 

9-33 

14-37 

12.04 

1893 

11.77 

8-45 

12.87 

II. 18 

1894 

9-75 

8.67 

11.38 

II.06 

1895 

10.94 

8.77 

12.72 

II.30 

1896 

10.39 

9.96 

12.14 

II.96 

1897 

9-°3 

10.52 

10.13 

12.26 

1898 

9.18 

10.82 

10.33 

13-24 

1899 

16.72 

14.68 

19.03 

16.63 

1900 

16.90 

16.70 

19.50 

i9-J3 

1901 

14.20 

11.00 

15.90 

14-25 

1902 

19.50 

n-95 

20.65 

14-45 

I9°3 

i7-5o 

11.25 

19.00 

13.80 

1904 

12.90 

10.65 

13-75 

13.00 

I905 

15.60 

12.00 

16.35 

14.70 

1906 

18.20 

12.90 

19-55 

16.40 

1907 

21.50 

13-65 

22.85 

18.05 

1908 

15-25 

12.30 

17.10 

14.50 

1909 

15-55 

12.00 

17.40 

14.10 

1910 

15-25 

12.25 

17.20 

15.90 

1911 

13-97 

11.60 

i5-7o 

15-35 

1912 

14-54 

14.20 

15-95 

17.80 

1  The  figures  are  derived  from  American  Iron  and  Steel  Association  Reports,  and  from  British 
periodicals.  They  give  the  prices  of  two  grades  of  iron  which  are  fairly  comparable  in  the  two 
countries,  —  foundry  iron  and  Bessemer  iron. 


CHAPTER  XI 

COPPER 

The  present  chapter  makes  a  digression.  We  leave  for  the 
moment  the  history  of  the  iron  industry  and  turn  to  copper.  Yet 
there  is  no  digression  as  regards  the  sequence  of  thought.  The 
course  of  events  in  the  copper  trade  serves  to  illustrate  further 
what  was  said  in  the  preceding  chapter  concerning  the  difficulty 
of  proving  whether  protection  has  been  applied  with  success  to  a 
young  industry,  and  to  show  the  need  of  chscrimination  in  the 
interpretation  of  historical  and  statistical  data. 

The  duties  on  copper  received  little  attention  during  the  greater 
part  of  the  period  covered  in  this  volume.  But  during  some  of 
the  earlier  years  they  were  much  discussed.  Their  history  centers 
about  the  act  of  1869,  by  which  for  the  first  time  a  considerable 
protective  duty  was  imposed.  Before  the  civil  war  copper  in 
bars  or  pigs  was  subject  to  a  nominal  duty  only  —  5%;  copper 
ore  was  free.  During  the  war  the  duty  on  copper  was  raised  to 
two  and  one-half  cents  a  pound,  copper  ore  being  subjected  to  the 
nominal  duty  of  5%.  The  act  of  1869  imposed  a  duty  of  five 
cents  a  pound  on  copper,  and,  what  was  quite  as  important,  one 
of  three  cents  a  pound  on  the  copper  content  of  imported  ores. 
The  measure  was  frankly  protective,  and  in  accord  with  the 
general  drift  of  the  time.  Congress  was  then  extending  and 
stiffening  the  high  duties  for  which  the  exigencies  of  the  civil  war 
had  given  occasion.  The  copper  bill  was  vetoed  by  President 
Johnson,  but  passed  over  his  veto,  being  aided  in  its  passage  by 
the  bitter  contest  between  the  President  and  the  dominant  Re- 
publicans. The  duties  then  established  remained  in  effect  with- 
out change  until  1883.  In  that  year  they  were  reduced  slightly, 
the  rate  on  copper  being  fixed  at  four  cents.  In  the  McKinley 
act  of  1890  a  sharp  reduction  was  made,  —  one  so  considerable 
as  to  mark  a  turning  point:  the  duty  on  copper  was  fixed  at  one 

161 


1 62         SOME  ASPECTS  OF   THE     TARIFF  QUESTION 

and  one-quarter  cents,  that  on  the  copper  content  of  ore  at  one- 
half  cent.  The  act  of  1894,  as  might  have  been  expected,  went 
still  farther,  and  admitted  copper  in  all  forms  free  of  duty. 
Thereafter  it  remained  free.  The  effective  protection  was  thus 
maintained  for  about  twenty  years,  from  1869  to  1890.  That  the 
process  of  reduction  should  have  been  carried  so  far  in  the  pro- 
tectionist act  of  1890  indicated  that  even  at  this  comparatively 
early  date  the  duty  was  felt  to  be  of  little  consequence.  What- 
ever effects,  good  or  bad,  are  traceable  to  the  copper  duty  must 
be  searched  for  in  the  period  before  1890. 

Turning  now  to  domestic  production,  we  find  a  plain  and  un- 
checkered  situation:  rapid  and  continuous  growth.  In  1869  the 
domestic  output  was  28  millions  of  pounds;  in  1880,  about  60 
millions;  in  1890,  after  a  decade  with  an  unparalleled  rate  of 
growth,  265  millions.  After  1890  the  advance  continued  year  by 
year;  and  in  1910,  the  annual  output  exceeded  1,000  millions  of 
pounds.  The  United  States  had  become  the  greatest  copper 
producing  country  in  the  world.  So  far  as  concerns  the  growth 
of  domestic  production,  the  apparent  success  of  the  protectionist 
policy  is  so  extraordinary  as  to  suggest  at  once  the  need  of  cau- 
tious interpretation:  the  figures  on  their  face  seem  to  prove  too 
much. 

Not  only  was  there  this  vast  increase  in  domestic  output :  ex- 
ports set  in  early  and  soon  reached  great  dimensions.  Some 
slight  imports  continued  for  a  few  years  after  1869,  insignificant 
as  compared  with  the  home  product.  About  1880  exports  began; 
fostered  for  a  time  (as  will  presently  be  explained)  by  a  "  dump- 
ing "  policy  on  the  part  of  the  copper  producers,  but  rapidly 
passing  beyond  this  semi-artificial  stage,  and  developing  as  normal 
exports.  By  the  middle  of  the  decade,  1880-90,  they  attained 
each  year  dimensions  considerable  in  comparison  with  the  out- 
put, —  10  per  cent  and  more.  After  the  changes  of  duty  in  1890 
and  1894,  and  especially  after  the  removal  of  all  duties  in  the 
latter  year,  the  course  of  international  dealings  became  radically 
different  from  what  it  had  been  before.  A  larger  and  larger  pro- 
portion of  the  mounting  domestic  product  was  sold  in  foreign 
countries,  until  by  the  close  of  the  century  the  foreign  consump- 


COPPER  163 

tion  exceeded  the  domestic.  Copper  became  one  of  the  leading 
articles  of  export  from  the  United  States.  At  the  same  time,  with 
the  complete  abolition  of  duties,  a  large  transit  trade  developed. 
Copper  was  imported  both  in  the  form  of  ore  and  of  bars,  and  then 
reexported.  The  great  smelting  and  refining  establishments 
handled  both  domestic  and  imported  ore.  All  in  all,  the  United 
States  became  the  dominant  country  in  the  world's  copper  mar- 
kets. In  no  branch  of  industry  has  American  progress  been  more 
great  or  rapid,  in  none  has  the  "  American  invasion  "  been  more 
spectacular. 

The  course  of  prices  was  such  as  must  be  expected  with  a 
development  of  this  sort.  The  chart  on  page  164  tells  the  story 
at  a  glance.1  For  the  first  decade  after  the  imposition  of  the  duty 
in  1869  the  price  of  copper  in  New  York  was  higher  than  the  price 
in  London,  the  difference  being  usually  the  amount  of  the  duty,  — 
not  far  from  five  cents  a  pound.  In  other  words,  the  ordinary 
effect  of  a  protective  duty  appeared.  During  the  next  decade 
there  was  unstable  eqinlibrium :  the  American  price  was  at  times 
somewhat  higher  than  the  British,  at  times  lower,  but  with  no 
divergence  at  all  equal  to  the  duty  (four  cents  under  the  act  of 
1883).  And  in  the  next  decade,  all  difference  in  price  ceased. 
Even  before  the  complete  abolition  of  the  duty  (1894)  domestic 
and  foreign  prices  became  virtually  the  same.  After  1894  they 
necessarily  moved  together. 

The  chart  has  every  feature  of  what  might  be  called  a  repre- 
sentative young  industries  chart.  So  far  as  concerns  the  rela- 
tion between  domestic  and  foreign  prices,  it  is  precisely  like  the 
chart  showing  the  course  of  steel  prices  abroad  and  at  home.2 
For  a  few  years  after  the  imposition  of  the  copper  duty,  domestic 
price  is  raised  by  the  full  amount  of  the  duty.  As  time  goes  on, 
domestic  price  falls  nearer  and  nearer  to  the  level  of  the  foreign, 
until  finally  all  difference  ceases.  The  American  consumer  in  the 
end  gets  his  copper  quite  as  cheaply  as  if  it  were  imported. 

1  I  am  indebted  for  the  preparation  of  this  chart  to  Mr.  E.  P.  Coleman,  Jr.,  who 
investigated  the  copper  industry  under  my  guidance  while  an  undergraduate  in 
Harvard  College. 

2  See  p.  140,  above. 


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COPPER  165 

Moreover,  in  this  instance  the  consummation  was  reached 
promptly,  and  the  abolition  of  the  protective  duty  also  came 
promptly.  The  other  data  seem  to  be  confirmatory:  there  is 
rapid  and  great  increase  of  production,  displacement  of  imports, 
complete  independence  of  foreigners.  The  protectionists  may  be 
expected  to  point  with  pride  to  this  record. 

Yet  in  fact  the  case  has  rarely  been  cited  by  the  protectionists; 
partly  perhaps  because  of  alleged  monopoly  and  manipulation  on 
the  part  of  the  domestic  producers,  but  chiefly  because  the  not 
unfamiliar  history  of  the  industry  shows  that  the  tariff  in  reality 
was  of  little  consequence.  The  extraordinary  progress  of  the  in- 
dustry was  obviously  due  to  the  discovery  and  exploitation  of 
great  natural  resources,  —  resources  so  rich  and  so  tempting  that 
the  same  effects  on  production,  prices,  and  international  trade 
would  have  come  about,  whatever  the  rates  of  duty. 

Three  episodes  stand  out:  the  development  of  the  copper 
mines  in  the  Michigan  peninsula,  the  discoveries  in  Montana, 
those  in  Arizona  and  the  southwest.  These  are  significant  for  the 
tariff  situation  in  their  chronological  order.  Indeed,  the  earliest 
(the  Michigan  case)  is  the  only  one  in  which  some  influence  from 
the  duties  might  be  sought  with  any  show  of  plausibility. 

That  there  were  rich  deposits  of  copper  in  the  now  famous 
peninsula  of  Michigan  had  long  been  known;  the  distribution  of 
the  "  native  "  copper  among  distant  Indian  tribes  had  early 
attracted  the  attention  of  travelers  and  ethnologists.  Some  ap- 
preciable production  of  copper  from  this  source  took  place  before 
the  civil  war.  Whatever  copper  was  then  produced  in  the  country 
came  from  the  Michigan  region;  and  it  remained  virtually  the 
only  source  of  supply  until  the  decade  1880-90.  The  remoteness 
of  the  peninsula,  its  dense  primeval  forests,  the  rigorous  winter 
climate,  stood  in  the  way  of  systematic  exploitation  with  large 
capital  outlay. 

That  stage  was  reached  in  the  middle  of  the  decade  1860-70. 
There  had  been  a  steady  increase  in  the  Michigan  output  during 
the  first  half  of  that  decade;  then  came  a  sudden  burst.  The 
renowned  Calumet  &  Hecla  mine  was  opened  in  1866,  and 
began  almost  at  once  to  turn  out  great  quantities  of  copper. 


1 66         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

The  story  of  Calumet  &  Hecla  is  typical,  and  not  so  simple 
as  is  implied  in  most  versions  and  allusions.     It  was  by  no  means 
a  case  of  treasure-trove,  —  a  pile  of  riches  uncovered  at  a  stroke 
and  easily  turned  to  account.     The  mine  proved  indeed  to  con- 
tain the  best  deposits  in  the  district;  but  before  this  was  ascer- 
tained, heavy  investments  had  to  be  made  and  great  risks  taken. 
Many  persons  refer  to  copper  mining,  and  especially  to  a  famous 
mine  like  the  Calumet  &  Hecla,  as  if  it  were  a  mere  matter  of 
digging  out  of  the  ground  shining  lumps  of  pure  vendible  copper. 
The  metal  in  fact  is  obtained  by  working  over  vast  quantities  of 
hard  copper-bearing  rock  brought  up  from  great   depths;    the 
interior  must  be  carefully  explored,  developed,  preserved  from 
caving  in;  expensive  hoisting  apparatus  must  be  installed,  with 
crushing  machinery,  water  supply,  a  railway  for  carrying  the 
rock  to  the  water,  and  so  on.     The  whole  calls  for  heavy  in- 
vestment and  for  great  initial  risks.      Even  in  this  case,  where 
handsome  returns  came  in  at  a  comparatively  early  stage,  there 
were  several  years  of  uncertainty,  of  false  starts  and  ill-devised 
apparatus,  of  imminent  failure.     Had  it  not  been  for  the  extraor- 
dinary energy,  courage,  technical  and  administrative  ability,  of 
the  younger  Agassiz,  and  the  unflinching  persistence  of  his  asso- 
ciates —  they  staked  their  all  —  the  venture  would  have  been 
not  phenomenally  profitable,  but  utterly  disastrous.     How  far 
under  such  circumstances,  a  fortune,  if  it  finally  comes,  can  be 
said  to  be  earned,  or  in  what  measure  successes  are  offset  by 
failures,  prizes  in  the  lottery  by  blanks,  —  this  is  one  of  the  prob- 
lems of  economic  principle  and  economic  policy  to  which  it  is 
most  difficult  to  give  an  answer  in  precise  terms.1 

But  the  particular  question  here  under  consideration  can  be 
answered  with  ease  and  certainty.  It  is  not  the  question  whether 
mining  enterprises  in  general,  with  their  need  of  great  investment 
and  assumption  of  heavy  risks,  do  or  do  not  come  within  the 
scope  of  the  young  industries  argument.     There  may  be  some 

1  See  the  vivid  account  of  the  enterprise  in  the  Letters  and  Recollections  of  Alexan- 
der Agassiz,  chapter  iv.  On  the  general  significance  of  risk,  especially  in  metal- 
liferous mines,  compare  Einaudi,  La  Rendita  Mineraria,  §  13,  pp.  47  seq.,  and  Taussig, 
Principles  of  Economics,  chapter  xliv,  ii,  pp.  92  seq. 


COPPER  167 

ground  for  maintaining  as  a  matter  of  general  reasoning  that, 
even  though  minerals  be  classed  as  "  raw  materials,"  the  essential 
reasons  for  giving  aid  to  nascent  industries  still  hold.  In  this 
instance,  however,  it  appears  that  the  young  industry  was  started 
and  was  being  actively  prosecuted  before  protection  was  applied. 
The  decisive  experiments  and  investments  were  made  in  1867- 
68;  by  1868  success  was  in  sight;  dividends  on  Calumet  &  Hecla 
began  in  1869  and  thereafter  were  continuous  and  generous. 
And  it  must  be  remembered  that  this  mine  never  stood  alone. 
Though  the  largest  and  most  conspicuous  in  the  Michigan  group, 
it  was  not  the  earliest,  nor  the  only  one  amply  profitable.  The 
production  of  copper  in  the  peninsula  was  already  considerable 
when  the  Calumet  &  Hecla  mine  began,  and  continued  to  grow 
from  various  other  mines  as  well.  The  duty  of  1869  clearly  was 
superfluous  as  a  device  for  encouraging  ventures  still  in  the 
experimental  stage.1 

During  the  decade  1870-80,  as  has  just  been  pointed  out,  the 
price  of  copper  in  the  United  States  was  higher  than  the  English 
price,  and  during  a  considerable  part  of  the  decade  it  was  higher 
by  the  full  extent  of  the  duty.  There  being  no  ground  for  giving 
any  credit  to  protection  because  of  its  having  given  needed  aid 
to  a  young  industry,  the  free  trader  can  find  nothing  to  balance 
the  loss  then  caused  to  the  community  by  the  tariff  charge.  And 
for  a  year  or  two  at  the  close  of  this  period  he  adds  something  to 
his  indictment ;  the  charge  on  the  community  was  made  higher  by 

1  The  following  figures,  giving  in  round  numbers  the  production  of  copper,  indi- 
cate what  was  the  position  of  the  Michigan  mines  in  1860-80.  For  comparison 
I  have  given  figures  for  later  years  also.  By  1890  Michigan  had  lost  its  dominant 
position  among  the  copper  producing  districts;  the  discoveries  in  Montana  and 
Arizona  (to  mention  the  chief)  completely  changed  the  situation. 

Copper  Produced  {in  millions  of  pounds) 


Calumet 
and  Hecla 

Total  in 
Michigan 

Total  in 
United  States 

i860 
1870 
1880 

14 
32 

60 

12 
26 
5i 

100 

16 

28 
60 

A 

1890 

Montana 
112 

Arizona 
34 

Utah 

Total 
United  States 
260 

1900 

78 

142 

270 

116 

19 

606 

1910 

73 

220 

283 

297 

125 

1,080 

1 68         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

combination  among  the  copper  producers.     The  mining  com- 
panies of  Michigan  then  produced  almost  all  the  American  cop- 
per; price  agreements  among  them  were  not  difficult  to  arrange; 
the  increasing  output  caused  prices  to  fall,  especially  during  the 
years  of  depression  that  followed  1873.     In  1879-81  there  was  a 
combination,  and  an  abrupt  rise  in  prices,  —  the  latter  furthered 
of  course  by  the  revival  of  industrial  activity.     To  maintain  prices 
at  home,  the  combinations  sold  for  export  at  lower  prices.     It 
was  a  clear  case  of  dumping,  explicable  on  the  theory  of  monopoly 
price.     As  it  happened,  the  combination  found  itself  plagued  un- 
expectedly by  the  return  to  the  United  States  of  part  of  the 
copper  which  had  been  sold  abroad  at  the  low  export  price:  the 
domestic  price  soared  so  much  that  it  proved  profitable  to  bring 
back  some  of  this  copper  and  sell  it  in  the  United  States  even  after 
paying  duty.     The  whole  train  of  events  serves  to  illustrate  both 
the  ordinary  operation  of  protective  duties  and  those  concomi- 
tants which  appear  when  the  protected  producers  combine.     It 
has  to  do  with  the  young  industries  argument  only  in  show- 
ing how  completely  the  domestic  copper  industry  had  passed 
the  experimental  stage  to  which   this   plea   for   protection  is 
applicable. 

The  later  development  of  copper  production  in  the  United 
States  stands  even  further  apart  from  any  connection  with  the 
tariff,  and  hence  may  be  dismissed  briefly.  In  the  decade  1880- 
90  Montana  became  an  important  producer,  and  very  shortly  the 
greatest  producer;  the  Anaconda  mine  being  as  conspicuous  in 
this  state  as  Calumet  &  Hecla  was  in  Michigan.  Here  again 
there  was  economic  exploit  almost  romantic  in  character:  dis- 
coveries, risks  (including  Indian  fights),  bold  investments,  great 
fortunes.  Before  long  a  similar  course  of  events  set  in  at  another 
far  distant  locality,  in  Arizona,  where  still  further  copper  re- 
sources of  vast  extent  were  discovered  and  developed.  They 
made  certain  the  American  command  of  the  industry,  and  con- 
tributed their  quota  of  American  fortunes.  And  in  recent  years 
the  remarkable  development  of  porphyry  mining  in  the  south- 
west, —  Arizona,  Utah,  Nevada, —  has  added  another  chapter 
of  the  same  sort.     There  are  economic  problems  in  plenty  through 


COPPER  169 

all  this  remarkable  episode  in  economic  history.  As  in  Michigan, 
there  were  great  risks,  heavy  investments,  intricate  questions  of 
mine  management  and  mine  engineering,  the  dominance  of  force- 
ful personalities,  —  conquests  almost  Napoleonic.  Thus  the 
same  question  of  prizes  and  blanks  arises.  How  far  were  private 
enterprise  and  the  prospect  of  riches  indispensable  for  industrial 
advance  ?  Other  problems  are  more  peculiar  to  the  later  western 
episodes.  The  speculative  character  of  copper  mining  led  to 
product  gambling  and  stock  gambling,  to  dubious  episodes  like 
the  flotation  of  the  Amalgamated  Copper  Company.  Looking 
over  the  long-run  course  of  events,  one  finds  a  general,  even 
though  very  irregular,  response  of  supply  to  demand.  The 
growth  of  electrical  industries  has  caused  an  enormous  increase  in 
the  demand  for  copper.  To  this  on  the  whole  the  supply  has 
responded;  so  that,  notwithstanding  occasional  violent  fluctua- 
tions, the  trend  of  prices,  if  the  occasional  flare-ups  be  disregarded, 
has  shown  no  such  marked  rise  as  might  have  been  expected  from 
the  changed  conditions  of  demand. 

But  all  this  serves  to  show  once  more  that  the  main  problems, 
interesting  enough  to  the  economist,  lie  outside  the  protective 
controversy.  The  only  direction  in  which  light  could  be  got  on 
the  tariff  question  is  in  the  possible  applicability  of  the  argument 
for  aiding  young  industries.  And  here  the  result  is  simply  nega- 
tive. The  case  has  only  a  sort  of  methodological  significance. 
The  fact  that  an  industry  has  developed  after  protection  was 
applied  does  not  prove  that  it  developed  because  protection  was 
applied.  The  course  of  copper  prices  and  copper  production  is 
just  such  as  one  would  expect  in  an  example  of  successful  protec- 
tion to  a  young  industry;  yet  it  is  clear  that  in  this  instance  the 
same  results  would  have  ensued  if  there  had  been  no  duties  at  all. 
The  extraordinary  richness  of  the  natural  resources;  the  prospect 
of  fortunes  in  return  for  daring,  persistence,  able  management; 
the  achievements  of  American  mining  engineers,  —  these  quite 
suffice  to  explain  the  great  development  which  has  taken  place. 
It  follows  that  one  must  be  cautious  in  other  cases  also;  in  that 
of  the  iron  and  steel  industry,  for  example,  considered  in  the 
preceding  chapter.     To  ehminate  protection  as  a  vera  causa  may 


I  JO        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

not  be  so  easy  as  in  the  case  of  copper.  But  the  evidence  must 
be  scanned  critically.  Only  in  the  rarest  instances  can  the 
economist  prove  beyond  cavil  his  conclusions  on  any  concrete 
question  of  public  policy.  He  must  compare,  weigh,  discrimi- 
nate, judge;  and  the  need  of  discrimination  could  hardly  be 
better  illustrated  than  by  this  example  from  the  copper  tariff. 


CHAPTER  XII 

PROTECTION  AND  COMBINATIONS.      STEEL  RAILS; 

TIN  PLATE 

We  return  now  to  the  iron  and  steel  industry,  and  take  up  the 
question  of  the  connection  between  the  tariff  and  the  trusts. 
The  growth  and  influence  of  combination  have  been  no  less  con- 
spicuous in  the  iron  and  steel  industry  than  in  sugar  refining. 
Here  also  it  is  to  be  asked  whether  the  protective  system  pro- 
moted combination  and  monopoly,  or  increased  the  profits  of 
combination. 

So  far  as  the  Steel  Corporation  itself  is  concerned,  it  can  hardly 
be  said  that  combination  was  promoted  by  the  tariff.  In  this 
regard  the  case  is  different  from  sugar  refining,  where  there  is 
tenable  ground  for  maintaining  that  the  very  formation  of  the 
trust  was  fostered  by  the  sugar  differential.  The  Steel  Corpora- 
tion was  not  formed  until  after  the  period  when  the  tariff  was 
of  vital  consequence  for  the  iron  and  steel  industry.  It  came 
after  the  depression  of  the  closing  years  of  the  nineteenth  cen- 
tury, when  prices  had  fallen  almost  dramatically  and  when  the 
independence  of  the  American  industry  had  become  an  accom- 
plished fact.  It  was  proximately  the  result  of  competition, 
feared  to  be  of  ruinous  effect,  among  the  domestic  producers 
themselves.  The  great  consolidation  was  expected  not  only  to 
obviate  such  competition,  but  to  carry  still  further  the  economies 
in  production  which  had  already  been  secured  by  the  constituent 
integrated  enterprises.  Though  the  tariff  may  have  been  the 
mother  of  the  sugar  trust,  it  had  no  such  relation  to  the  steel 
trust. 

A  different  question  is  whether  the  tariff  increased  the  profits 
of  the  consolidated  industry;  and  still  different  is  the  question 
whether  among  the  constituent  corporations  united  in  the  Steel 
Corporation  there  may  not  have  been  incitements  to  combina- 
tion, as  well  as  increased  profits,  from  the  tariff.     Two  typical 

171 


172         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

cases  will  serve  to  show  what  answers  can  be  given  to  these 
questions :  that  of  steel  rails,  already  considered  in  its  bearing  on 
the  young  industries  argument;  and  that  of  tin  plate.  The 
latter,  as  it  happens,  suggests  in  its  turn  the  young  industries 
problem:  was  it  nurtured  to  success  through  tariff  aid  ? 

In  the  steel  rail  branch  of  the  industry,  pools  and  price  agree- 
ments were  common  during  the  earlier  period,  from  1870  to  about 
1900.  They  had  the  same  checkered  history  as  pooling  arrange- 
ments in  manufacturing  industries  at  large.  They  were  held 
intact  with  comparative  ease  in  years  of  activity  and  rising  de- 
mand, but  collapsed  in  times  of  depression. 

A  formal  pool  (the  Steel  Rail  Association)  was  established 
early  and  was  maintained  until  1893,  though  with  breaks  and 
with  the  quarrels  over  allotments  which  always  appear  under 
such  combinations.  In  1893  it  went  to  pieces,  but  was  shortly 
reestablished,  and  kept  in  working  effect  until  1897.  Then, 
under  the  cumulative  influence  of  long-continued  depression,  it 
broke  down  completely.  A  couple  of  years  of  fierce  cut-throat 
competition  followed,  prices  collapsing  beyond  precedent.  But 
in  1899  the  pool  was  again  set  up,  and  was  maintained  until  1901, 
when  the  Steel  Corporation  was  formed  and  the  new  stage  was 
reached  by  the  iron  and  steel  industry  at  large.1 

Hence  the  decline  in  the  price  of  steel  rails  which  has  been 
already  considered  did  not  take  place  by  gradual  steps  spread 
over  a  considerable  period;  in  other  words,  did  not  take  place  in 
the  manner  to  be  expected  in  case  of  a  commodity  produced 
under  continuously  competitive  conditions.  It  came  through  a 
series  of  sudden  drops,  following  the  collapses  of  the  successive 
pools.  For  years  at  a  time,  the  price  was  kept  by  combination 
at  figures  extremely  profitable.  It  is  not  to  be  doubted  that  the 
retention  of  a  duty  heavy  enough  to  keep  out  foreign  competitors 
invited  and  aided  combination.  It  thus  served  to  swell  the 
profits  of  the  rail  makers,  and  especially  of  those  among  them 

1  Accounts  of  the  steel  rail  pools  of  this  earlier  period  are  to  be  found  in  the  Iron 
Age,  November  16,  1893;  February  n,  1897;  January  1,  1901.  On  the  general 
prevalence  of  such  agreements  in  the  iron  and  steel  trade  see  Belcher,  "  Industrial 
Pooling  Agreements,"  in  Quarterly  Journal  of  Economics,  xix,  p.  in  (1904). 


PROTECTION  AND  COMBINATIONS  1 73 

who  were  foremost  in  organization  and  technical  advance.  The 
decade  from  1880  to  1890  was  the  golden  period  for  the  leading 
iron  and  steel  manufacturers.  Profits  all  around  were  high; 
those  in  rail  making  were  enormous.  All  this  is  part  of  the 
price  which  the  public  had  to  pay  for  the  gains,  real  or  supposed, 
from  protection  to  the  young  industry.  The  free  trader  is  justi- 
fied in  saying  that  the  initial  burden,  serious  even  if  tempered 
by  domestic  competition  (as  is  implied  in  the  young  industries 
argument),  was  made  needlessly  and  indefensibly  high  by  monopo- 
listic combination. 

With  the  opening  of  the  twentieth  century,  however,  and  the 
advent  of  the  Steel  Corporation,  the  situation  changed.  Some 
effect  of  combination  on  the  price  of  steel  rails  persisted;  but  did 
not  appear  in  the  same  way  as  before.  The  influence  of  the  tariff 
in  raising  prices  and  fostering  combination  virtually  ceased. 

As  our  price  chart l  indicates,  steel  rails  were  sold  after  1902 
at  the  unchanging  price  of  $28.00  a  ton.  No  sensible  person  will 
believe  that  the  price  could  be  held  at  this  precise  figure,  without  a 
variation  from  month  to  month  or  from  year  to  year,  except 
through  the  abrogation  of  competitive  bidding.  For  several 
years  after  the  formation  of  the  Steel  Corporation,  there  was  a 
firmly  organized  pool,  with  allotted  percentages  of  output  and 
with  money  payments  to  offset  variations  from  those  percentages.2 
As  time  went  on,  this  close-knit  form  of  combination  was  given 
up;  doubtless  in  pursuance  of  the  avowed  and  sincere  desire  of 
the  Corporation  to  "be  good  "  and  to  conform  to  the  federal 
statute.  A  loose  understanding  was  substituted,  probably  not 
such  as  to  constitute  a  violation  of  the  Sherman  act,  but  sufficient 
to  maintain  the  same  unvarying  price.3 

1  See  the  chart  on  p.  140. 

2  See  for  example  the  testimony  in  the  government  suit  of  191 2-13  against  the 
Steel  Corporation,  Transcript  of  Record,  pp.  1674-1681.  There  was  apparently  no 
written  agreement,  but  all  the  essentials  of  a  pool.  An  arbitrary  figure  ($17  or 
$18  a  ton)  was  fixed,  presumably  an  approximation  to  prime  cost;  everything 
received  above  this  by  each  member  was  paid  to  a  representative  of  the  pool,  who 
divided  the  money  among  the  members  according  to  fixed  allotments.  This 
arrangement  was  kept  up  until  1904,  possibly  even  to  a  later  date. 

3  See  the  testimony  in  the  Steel  Corporation  suit,  pp.  92,  337. 


174         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

The  steady  price  maintained  under  these  conditions x  was  not, 
however,  higher  than  the  foreign  price.  So  much  is  shown  on 
the  chart:  the  two  series  went  to  virtually  the  same  level,  and 
remained,  on  the  whole,  in  the  same  relative  positions.  British 
prices  of  rails  were  more  irregular  than  American  prices,  and 
therein  showed  the  effect  of  the  higgling  of  the  market;  but  they 
were,  as  a  rule,  no  lower.  The  price  in  the  United  States  may 
have  been  an  unduly  high  one,  —  high,  that  is,  compared  with 
domestic  cost  of  production  and  with  the  price  that  would  have 
ruled  under  free  competition.  On  this  point  there  is  some  evi- 
dence, presently  to  be  considered,  from  the  fact  that  rails  were 
sold  for  export  at  lower  prices  than  those  paid  by  domestic  con- 
sumers.2 But  such  discrimination  has  nothing  to  do  with  the 
immediate  tariff  question,  —  the  relation  between  foreign  and 
domestic  prices.  If  the  domestic  price  is  as  low  as  the  foreign, 
the  tariff  has  ceased  to  be  an  operative  cause.  The  stage  where 
it  ceased  to  be  operative  was  reached,  so  far  as  steel  rails  are  con- 
cerned, by  the  opening  years  of  the  century. 

It  is  not  within  the  scope  of  the  present  volume  to  consider  the 
problems  of  combination;  but  a  word  may  be  said  on  one  aspect, 
suggested  by  the  even  course  of  the  steel  rail  price  since  1902. 
Beyond  question  the  influenceof  the  Steel  Corporation  was  exerted 
toward  maintaining  the  unvarying  price,  and  beyond  question 
this  was  part  of  a  large  general  policy.  The  guiding  spirits  of 
the  Corporation  endeavored  deliberately  to  lessen  the  ups  and 
downs  of  the  iron  and  steel  trade;  to  prevent  prices  from  soaring 
in  times  of  active  demand  and  from  sinking  abruptly  in  the  en- 
suing periods  of  depression.  That  policy  was  sought  to  be 
applied  to  all  the  forms  of  crude  iron  and  steel,  and  showed  its 

1  The  steadiness  of  price  was  not  in  reality  so  complete  as  the  chart,  based  on 
the  "  official  "  quotations,  would  indicate.  During  1903  there  was  heavy  demand 
for  steel  rails,  and  the  mills  were  unable  to  fill  the  orders  that  poured  in  from  the 
railroads.  The  contract  price  remained  $28.00,  but  not  for  prompt  delivery. 
Premiums  were  paid  for  "  spot  "  rails;  in  other  words,  the  market  price  went  up. 
Considerable  importations  took  place  during  this  year,  chiefly  to  ports  on  the 
Pacific  Coast,  —  the  only  importations  of  consequence  since  1887.  This  flurry 
subsided  within  a  year. 

2  See  what  is  said  below  on  exports  and  "  dumping,"  pp.  202  seq. 


PROTECTION  AND  COMBINATIONS  175 

effects  in  a  comparative  steadiness  of  the  prices  of  all  these  articles 
during  the  years  before  and  after  the  crisis  of  1907,  — a  steadi- 
ness in  sharp  contrast  with  the  advance  and  recession  of  prices 
which  had  been  the  concomitants  of  similar  industrial  cycles 
during  the  nineteenth  century.  It  happened  that  steel  rails, 
being  not  only  produced  by  a  comparatively  small  knot  of  large- 
scale  establishments,  but  usually  sold  in  large  blocks  to  the  rail- 
ways, offered  specially  favorable  conditions  for  carrying  on  the 
policy  without  deviation.  For  other  products  that  policy  was 
more  difficult  to  hold;  and  toward  the  end  of  the  period  of 
depression  its  maintenance  proved  impossible.  Prices  of  steel 
billets  and  the  like  fell  sharply  in  191 1.  Nevertheless,  looking 
at  this  period  of  expansion  and  contraction  as  a  whole,  a  general 
steadying  influence  still  appears.  That  it  appears  as  regards 
prices,  does  not  prove  that  it  is  to  be  found  in  output  and  em- 
ployment also;  fluctuations  in  these  continued;  yet  even  here 
it  might  be  said  with  some  show  of  reason  that  a  moderating  in- 
fluence was  exerted.1 

These  are  matters  on  which,  as  indeed  on  so  many  of  the 
phenomena  of  concentration  and  combination,  further  evidence 
must  be  awaited  before  judgment  can  be  passed.  It  remains  to 
be  seen  whether  combination,  with  its  almost  inevitable  con- 
comitant of  prices  above  the  competitive  rates,  tends  to  mitigate 
the  fluctuations  of  industry.  Such  is  a  common  opinion  among 
German  investigators.  It  may  be  that  this  gain  will  prove  im- 
possible to  secure  at  all;  or,  if  secured,  may  be  outweighed  by 
the  shackling  of  progress,  the  accentuated  inequality  of  distribu- 
tion, and  other  possible  evils  of  monopoly.  But  these  ulterior 
questions  go  quite  beyond  the  range  of  the  protective  controversy. 

Questions  somewhat  similar  arise  in  the  case  of  tin  plate:  a 
curious  episode  in  tariff  history,  much  debated  and  much  mis- 
understood.2 

1  See  an  article  by  E.  S.  Meade,  "  Price  Policy  of  the  Steel  Corporation, "Quarterly 
Journal  of  Economics,  May,  1908,  xxii,  p.  452. 

2  On  this  topic,  I  have  been  greatly  aided  by  the  research  of  one  of  my  students, 
Mr.  D.  E.  Dunbar,  the  results  of  whose  work  are  shortly  to  be  published  in  book 
form  as  one  of  the  Hart  Schaffner  &  Marx  prize  essays. 


176         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

Until  1890,  tin  plate  had  been  left  outside  the  pale  of  the  pro- 
tective system.  The  duty  was  so  low  that  no  tin  plate  was  pro- 
duced within  the  country,  and  the  total  supply  was  secured  by 
importation.  This  exceptional  treatment  was  long  the  cause  of 
protest  on  the  part  of  the  protectionists.  It  was  said  to  have 
arisen  from  a  wrong  construction  by  the  Treasury  Department 
of  a  clause  in  one  of  the  earlier  tariff  acts,  whose  language  was 
such  as  to  be  held  to  impose  a  low  ad  valorem  duty,  —  one  much 
lower  than  Congress  may  have  intended  to  levy.  At  all  events 
the  duty,  as  unequivocally  fixed  in  a  series  of  acts  preceding  that 
of  1890,  was  a  moderate  one,  and  operated  as  a  strictly  revenue 
duty;  therein  being  in  marked  contrast  to  the  highly  protective 
duties  on  other  iron  and  steel  products.  This  anomaly  was  put 
an  end  to  when  the  McKinley  tariff  act,  with  its  emphatic  pro- 
tectionist intent,  was  passed  in  1890.  The  duty  was  raised  to 
the  level  of  the  others  in  the  iron  and  steel  schedule.  The  in- 
creased rate,  however,  did  not  remain  in  effect  long;  a  sharp 
reduction  was  made  in  the  Wilson  act  of  1894.  After  a  slight 
advance  in  1897  (by  no  means  to  the  figure  of  1890),  the  duty 
was  again  lowered  in  1909  to  the  precise  rate  of  1894.  The 
salient  fact  in  all  these  changes  is  that  in  1890  a  high  duty  was 
applied,  but  was  maintained  for  only  four  years,  the  later  duties 
being  comparatively  moderate.1 

The  development  of  the  industry  under  this  short-lived  appli- 
cation of  high  protection  was  extraordinary;  so  extraordinary  as 
to  surprise  friends  no  less  than  foes.  The  act  of  1890  had  pro- 
vided that  the  duty  imposed  by  it  should  not  remain  in  effect 

1  The  precise  duties,  with  ad  valorem  equivalents  (on  the  basis  of  foreign  prices) 
for  the  specific  duties  of  1875  and  1890,  were: 

1862  25  per  cent  ad  valorem 

1872  IS  "   "   " 

1875   1.1  cents  per  lb.  (equivalent  to  20  per  cent) 

1883   1         "        "     "    (        "  "30        "       ) 

1890  2.2     "        "     "    (        "  "70        "       ) 

1894  1.2      "        ■     " 

1897   1.5      "        ■     ■ 

1909   1.2     "        "     " 

1913  15  per  cent  ad  valorem 

A  duty  of  2.5  cents  a  pound  had  been  provided  (i.  e.,  probably  meant  to  be  im- 
posed) in  1872,  but  had  never  gone  into  effect,  because  of  the  Treasury  ruling 
referred  to  in  the  text. 


PROTECTION  AND  COMBINATIONS  IJJ 

after  1897  unless  the  domestic  production  in  some  one  year 
before  July  1,  1897,  should  amount  to  one- third  of  the  importa- 
tions. In  other  words,  the  maintenance  of  the  high  duty  had 
been  made  contingent  on  a  considerable  development  in  the 
domestic  output,  and  the  legislators  evidently  were  not  sure  that 
this  development  would  take  place.  It  happened  that  not  only 
the  amount  called  for  under  the  act  was  produced  at  home,  but 
very  much  more.  The  domestic  production  advanced  by  leaps 
and  bounds,  and  within  three  years  l  the  required  quota  of  one- 
third  was  supplied.  All  the  provisions  of  the  act  of  1890  were  of 
course  swept  away  in  1894,  and  the  duty,  as  just  noted,  was  almost 
cut  in  half.  The  advance  of  the  domestic  tin  plate  industry, 
however,  went  on  without  a  halt,  while  imports  steadily  declined. 
By  the  close  of  the  decade  the  domestic  product  had  entirely 
superseded  the  foreign.  Some  imports  continued  after  1900,  but 
they  were  only  nominal.  Almost  all  the  tin  plate  that  continued 
to  be  brought  in  from  England  was  reexported  under  drawback, 
chiefly  by  the  Standard  Oil  Company,  the  imported  plate  being 
made  up  into  the  large  square  tin  cans  which  this  Company's 
export  trade  has  made  ubiquitous  in  the  tropics  and  the  orient. 
So  far  as  domestic  consumption  was  concerned,  imports  were 
completely  superseded.  The  districts  in  Wales  from  which  tin 
plate  had  previously  come,  and  which  indeed  had  previously 
been  almost  the  sole  producers  for  the  whole  world,  were  hard 
hit,  and  went  through  a  long  and  trying  period  of  depression, 
which  was  observed  by  the  American  protectionists  with  a 
satisfaction  but  little  concealed.2 

Before  the  decade  was  completely  ended,  however,  another 
event  occurred,  most  unwelcome  to  the  protectionists,  and  re- 
ceived with  a  jubilant  "  we  told  you  so  "  by  the  other  side.  In 
1898,  in  the  course  of  the  veritable  mania  for  combinations  which 
characterized  this  era  in  the  United  States,  the  American  Tin 
Plate  Company  was  formed,  including  virtually  all  the  producers 
of  tin  plate.     The  protective  tariff  became  the  mother  of  a  trust, 

1  That  is,  by  1894.  The  tin  plate  duty,  though  imposed  in  1890,  did  not  go  into 
effect  until  July  1,  1891. 

2  I  append  at  the  close  of  this  chapter  statistics  on  the  tin  plate  situation. 


178         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

and  that  trust  exploited  the  possibilities  of  protected  monopoly. 
Not  long  after,  in  1901,  the  great  Steel  Corporation  absorbed  the 
Tin  Plate  Company  as  one  of  its  constituents;  the  great  trust 
succeeded  the  smaller  trust.  The  protectionists  were  put  on  the 
defensive  when  the  free  traders  alleged  that  this  sort  of  thing  was 
the  natural  consequence  of  a  protective  tariff. 

So  much  on  the  conspicuous  aspects  of  the  case.  A  more  de- 
tailed examination,  however,  is  necessary,  in  order  to  make  clear 
the  effect  of  protection  both  on  the  establishment  of  the  industry 
within  the  country  and  on  the  development  of  monopoly  condi- 
tions. 

Tin  plates  are  thin  sheets  of  iron  or  steel  coated  with  tin  (in 
former  times,  iron  sheets  were  used,  since  the  revolution  in  steel 
making,  always  steel).  Their  production  involves  two  distinct 
operations:  the  making  of  the  steel  sheets  or  so-called  black 
plates,  and  their  tinning.  The  former  of  these  operations,  the 
more  important,  divides  itself  again  into  two;  the  making  of  the 
crude  steel  in  the  form  of  suitable  bars,  and  the  rolling  of  these 
bars  into  thin  sheets  suitable  for  tinning.  Of  the  cost  of  a  given 
quantity  of  tin  plates,  something  like  two-thirds  is  the  cost  of  the 
black  plates  or  steel  sheets;  and  of  the  cost  of  the  black  plates 
again,  60  per  cent  is  the  cost  of  the  steel  bars  (known  in  the  trade 
as  sheet  bars)  -1  The  making  of  the  fundamental  raw  material,  — 
crude  steel  in  the  form  of  bars,  —  has  been  subject  to  the  general 
influences  described  in  the  preceding  survey  of  the  steel  industry 
at  large.  The  production  of  the  black  plates  by  rolling  from  the 
bars,  and  the  coating  of  these  sheets  with  tin,  involve  operations 
of  a  more  special  kind. 

The  unexpected  growth  of  the  tin  plate  industry  after  1890 
was  due  chiefly  to  the  cheapening  of  the  fundamental  raw  ma- 
terial, —  sheet  bars.     The  decade  after  1890,  it  will  be  remem- 

1  For  example,  in  the  middle  of  1913,  the  constituent  elements  in  the  cost  of 
production  for  a  ton  of  tin  plate  stood  in  round  numbers  as  follows: 

Sheet  bars  (including  freight,  wastage,  and  the  like) $31.00 

Cost  of  Rolling 20O° 

Cost  of  Tinning 25-°° 

$76.00 

I  derive  these  figures  from  information  privately  given. 


PROTECTION  AND  COMBINATIONS  Ijg 

bered,  was  the  period  in  which  the  American  steel  industry- 
reached  the  stage  of  independence.  For  some  years  after  the 
crisis  of  1893,  crude  steel  was  considerably  cheaper  in  the  United 
States  than  in  England;  and  though  this  extreme  situation  did 
not  endure  after  the  ensuing  revival  of  trade,  differences  between 
domestic  and  foreign  prices  became  negligible  and  remained  so. 
The  American  maker  of  sheets  and  tin  plates  was  no  longer  at 
a  disadvantage  in  the  price  of  his  bars.  Before  1890  he  had  been 
at  such  a  disadvantage;  and  the  continued  importation  of  tin 
plate  was  to  all  intents  and  purposes  the  importation  of  bars  in 
this  form.  It  was  the  changed  situation  as  regards  the  raw 
material  which  explains  the  unchecked  progress  of  the  tin  plate 
industry  in  face  of  the  reduction  of  duty  in  1894.  A  duty  on 
tin  plate  of  1.2  or  1.5  cents  a  pound  (the  rates  of  1894  and  1897), 
was  a  very  different  matter  according  as  the  material  was  or  was 
not  as  cheap  as  in  Great  Britain.  With  that  material  equally 
cheap,  the  duty  of  1.2  cents  was  no  less  effective  for  protection 
in  1894  than  the  duty  of  2.2  cents  had  been  in  1890.  The  main 
cause  of  the  rapid  growth  of  the  tin  plate  industry  in  1890- 1900 
was  the  lowered  price  of  crude  steel;  it  was  one  among  the 
consequences  of  the  general  revolution  in  the  iron  and  steel 
industry. 

Both  for  this  earlier  period,  and  for  the  later  stage  which  set 
in  with  the  formation  of  the  Steel  Corporation  in  1901,  the  rela- 
tion between  domestic  and  foreign  prices  of  tin  plate  is  instructive. 
The  chart  on  page  180  shows  this  relation  for  the  entire  period 
1890-1913.  It  indicates  that  immediately  after  1890,  American 
prices  exceeded  foreign  by  the  full  amount  of  the  duty.  During 
the  years  in  which  the  McKinley  duty  was  in  effect  (1891-94) 
there  was  what  may  be  called  the  normal  effect  of  protection: 
domestic  prices  were  raised  by  the  full  amount  of  the  duty. 
Toward  the  middle  of  the  decade,  however,  imports  ceased;  prices 
were  not  higher  in  the  United  States  even  by  the  amount  of  the 
lowered  duty  of  1894.  Some  difference  in  price  remained,  charge- 
able to  the  duty,  but  held  in  check  by  competition  among  the 
domestic  producers,  and  apparently  in  process  of  continuous 


l8o         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 


reduction,  —  a  reduction  made  possible  chiefly  by  the  decline  in 
the  price  of  crude  steel. 

Then  came  in  1898  the  spectacular  episode  of  the  American 
Tin  Plate  Company,  and  the  exploitation  of  tariff  possibilities  by 
the  newly-formed  monopoly.  Attempts  at  pooling  and  price 
agreement  had  been  made  by  the  scattered  tin  plate  producers  in 
1896-98,  with  the  usual  instability  of  these  looser  forms  of  com- 
bination. Finally,  one  of  the  arch  promoters  in  this  promoting 
period,  Mr.  W.  H.  Moore,  was  enlisted,  and  succeeded  in  bringing 

Chart  IV 


♦  5.00 
4.00 
3.00 
2.00 
1-00 


^_  Average  Yearly  Prices  of  American  Tin  Plate  (Per.box  108  lbe. .14  x  20) 
"           "            "       "     Welsh       "        "         "      "       "    "    "  "  " 



/    / 

--- 



X 

** 

X. 

p^-" 

.__. 

■--. 









/ 

jO>  Gi  O  CJ>  Ol  CD  O")  CD 

CD  CO         CO  CO  CO  CO  CO  CO 


Of—        (Nco^riocor^-co 
OOOOOO  O  O  O 

o        cri       oi        o)        Q>        cn        o       en        o        o>        a        cr>        c~> 


about  a  tight  organization.  The  Tin  Plate  Company  bought 
out  once  for  all  the  various  competing  concerns,  in  part  with 
cash,  chiefly  by  the  issue  of  its  own  common  and  preferred  stock. 
With  the  meteoric  financial  operations  that  ensued  the  present 
inquiry  is  not  concerned.  The  stock  was  liberally  watered,  its 
par  value  being  four  or  five  times  the  price  in  cash  which  would 
have  sufficed  to  purchase  all  the  plants;  and  it  became  an  active 
speculative  stock.  This  was  one  of  the  most  profitable  among  the 
many  profitable  speculations  of  that  extraordinary  time.  So  far 
as  the  price  of  tin  plate  was  concerned,  the  effect  was  unmistak- 
able. The  American  price  advanced  at  once,  and  advanced  as 
compared  with  the  British  price.  It  was  raised  to  the  full  limit 
permitted  by  the  tariff  (now  that  of  1897,  with  a  duty  of  1.5 
cents  a  pound).1 

1  On  this  earlier  stage,  see  the  good  account  in  Jenks,  The  Trust  Problem  (1900), 
pp.  157  seq.,  where  is  also  an  elaborate  chart  showing  the  course  of  prices  1888-99. 


PROTECTION  AND  COMBINATIONS  l8l 

For  two  or  three  years,  this  situation  was  maintained  with  no 
great  modification.  The  price  of  tin  plate  was  kept,  if  not  quite 
up  to  the  foreign  price  plus  duty,  much  above  the  price  which 
would  have  prevailed  under  competition.  The  Tin  Plate  Com- 
pany paid  dividends  on  its  common  stock  as  well  as  on  its  pre- 
ferred. It  was  a  profitable  property  when  absorbed  by  the  Steel 
Corporation  in  1901 ;  and  that  absorption  was  doubtless  expected 
to  strengthen  the  command  of  the  tin  plate  industry  by  the  great 
combination.1 

After  1 90 1,  however,  the  situation  changed  in  several  respects. 
In  the  first  place,  the  Steel  Corporation's  command  of  the  in- 
dustry became  less,  not  greater.  Some  competition  had  sprung 
up  even  before  1901.  The  Tin  Plate  Company's  operations  had 
been  too  profitable  not  to  invite  competition,  notwithstanding 
endeavors  to  shut  out  interlopers  by  exclusive  contracts  with  the 
makers  of  tin  plate  machinery.  When  the  company  was  formed, 
in  1898,  it  controlled  95  per  cent  of  the  country's  output.  In  1901 
its  successor,  the  Steel  Corporation,  found  it  still  in  control  of 
nearly  three-quarters  of  the  output.  The  proportion,  however, 
declined  almost  steadily  after  1901,  until  by  191 1  and  191 2  the 
Steel  Corporation  produced  no  more  than  60  per  cent  of  the  total. 
The  independent  manufacturers,  some  of  them  large-scale  pro- 
ducers, had  a  very  substantial  part. 

Not  only  in  control  of  the  output,  but  in  the  course  of  prices 
also,  is  there  evidence  of  changed  conditions.  As  the  chart 
shows,  the  domestic  price  continued  for  many  years  to  range 
higher  than  the  foreign;  yet  with  a  tendency  toward  a  lessening 
of  the  difference.  At  no  time  after  1901  was  there  such  an  ex- 
ploitation of  the  tariff  as  in  the  year  immediately  after  the  Tin 
Plate  Company  was  formed.  The  domestic  price,  though  higher 
than  the  foreign,  was  by  no  means  higher  by  the  full  amount  of 
the  duty.  Imports  quite  ceased ;  the  duty  was  prohibitory;  but 
the  domestic  consumer  paid  a  tribute  less  than  the  amount  of  the 

1  The  tin  plate  stock  was  exchanged  for  stock  of  the  Steel  Corporation  on  these 

terms: 

U.  S.  Steel  Corporation 
For  every  $100  of  Preferred  Stock  Common  Stock 

Tin  Plate,  Preferred  Stock 125 

■        ■      Common       "    20  125 


1 82         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

duty.  Gradually  that  tribute  became  still  less;  the  domestic 
price  approached  the  foreign;  until  finally,  by  191 1,  almost  all 
difference  had  disappeared.  The  price  within  the  country  became 
virtually  as  low  as  without.  The  protectionist,  surveying  the 
whole  course  of  development,  might  maintain,  for  this  branch  of 
the  steel  trade  as  for  others,  that  notwithstanding  regrettable 
aberrations  there  had  been  ultimate  gain  from  the  nurture  of  the 
nascent  industry. 

Considering  first  the  years  from  1901  to  say  1910,  when  prices 
were  still  higher  within  the  country  than  without,  we  may  inquire 
what  degree  of  influence  was  exerted  by  the  Steel  Corporation, 
and  to  what  extent  the  prices  and  the  profits  can  be  called 
monopolistic.  Control  of  60  or  70  per  cent  of  the  output  is  not 
complete  monopoly,  but  it  gives  necessarily  a  commanding  posi- 
tion. The  independent  manufacturers,  though  no  doubt  really 
independent,  were  yet  in  awe  of  the  one  great  producer.  Prices 
were  not  fixed  by  combination  or  agreement;  there  was  a  studi- 
ous effort  to  do  nothing  that  would  constitute  a  violation  of  the 
an ti- trust  law;  but  there  were  conferences  and  understandings, 
and  friendly  pressure  for  the  maintenance  of  prices.  The  fact 
that  most  of  the  independents  had  to  procure  their  material  — 
the  sheet  bars  —  from  the  Corporation,  contributed  not  a  little 
toward  its  influence  throughout  the  tin  plate  trade.  Here,  as 
elsewhere,  the  policy  of  the  Steel  Corporation  was  to  maintain 
steadiness,  preventing  fluctuations  in  prices  and  if  possible  in 
output.  Though  not  so  eminently  successful  as  in  the  case  of  steel 
rails,  its  policy  did  serve  to  minimize  fluctuations.  The  steadied 
prices  were  doubtless  somewhat  higher  than  unrestricted  com- 
petitive prices  would  have  been,  and  in  so  far  were  the  source  of 
some  quasi-monopolistic  gains,  —  gains  shared  by  the  inde- 
pendents, or  at  least  by  those  among  them  who  could  produce 
as  cheaply  as  the  Steel  Corporation  itself. 

One  important  factor  throughout  this  period,  not  in  the 
United  States  only,  but  the  world  over,  was  the  constant  increase 
in  the  demand  for  tin  plate.  The  total  output  and  the  total  con- 
sumption rose  rapidly  and  without  halt.  The  Steel  Corporation's 
own  output,  though  it  fell  relatively  to  the  whole,  rose  absolutely. 


PROTECTION  AND  COMBINATIONS  1 83 

The  use  of  prepared  food,  conserved  in  tins,  spread  more  and 
more,  and  the  ever-increasing  quantities  of  tin  plate  found  a 
ready  market.  It  was  this  increase  of  demand  which  proved  the 
saving  of  the  tin  plate  makers  of  Wales.  The  long  stage  of  de- 
pression through  which  the  Welsh  industry  had  to  pass  came  to 
an  end  as  other  markets  gradually  enlarged,  —  in  South  America, 
the  East,  and  the  Continent.  The  Welsh  product  rose  not  only 
to  its  former  dimensions,  but  even  above.  This  upward  swing 
led  to  a  stiffening  of  British  prices,  which  in  turn  contributed  to 
wiping  out  the  difference  between  them  and  American  prices. 
Some  technical  changes  also  took  place  in  Wales  as  well  as  in  the 
United  States;  of  these,  more  presently. 

A  significant  phase  of  the  course  of  events  after  1901  was  the 
development  of  an  export  trade  from  the  United  States:  not 
merely  the  export  under  drawback  of  imported  tin  plate  (in  the 
form  of  tin  cases),  but  the  export  of  tin  plate  of  domestic  manu- 
facture. These  exports  began,  as  is  shown  in  the  table  appended 
to  the  present  chapter,  shortly  after  the  formation  of  the  Steel 
Corporation,  and  reached  substantial  dimensions  by  1905.  In 
191 1  and  19 1 2  they  increased  markedly,  and  in  the  latter  year 
were  near  five  million  dollars'  worth.  At  first  they  went  almost 
exclusively  to  Canada,  for  whose  market  the  Steel  Corporation 
had  geographical  advantages.  But  in  the  very  recent  period 
(191 1  and  19 1 2)  large  quantities  were  sent  to  South  America  and 
Asia.  Virtually  all  were  exported  by  the  Steel  Corporation. 
Not  only  this;  they  were  "  dumped  "  by  the  Corporation. 
Prices  to  foreigners  were  steadily  lower  than  to  purchasers  in  the 
United  States.  The  policy  of  selling  at  lower  prices  abroad 
was  extended  also  to  American  buyers  who  used  tin  plate  in 
an  export  trade  of  canned  goods.  Such  buyers  were  given  a 
rebate  or  drawback,  similar  to  that  which  the  government  grants 
on  the  export  of  goods  in  which  imported  materials  have  been 
.used. 

Systematic  dumping  of  this  kind  suggests  monopoly  price,  or 
something  closely  akin  to  it.  The  general  reasoning  which  points 
to  this  conclusion  is  stated  below.1     Suffice  it  here  to  say  that  the 

1  See  the  next  chapter,  pp.  208  seq. 


184         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

practice  of  selling  abroad  various  products  at  lowered  prices,  — ■ 
not  tin  plate  only,  but  others  as  well,  —  adds  to  the  evidence 
going  to  show  that  the  prices  of  many  forms  of  iron  and  steel 
were  fixed  under  conditions  different  from  those  of  unfettered 
competition.  Even  though  the  Steel  Corporation  possessed  no 
monopoly  in  any  strict  sense  of  that  term,  and  even  though  its 
control  of  prices  therefore  was  restricted  and  precarious,  the 
general  situation  was  that  of  a  combination  price,  not  a  strictly 
competitive  price.  A  preponderant  control  of  output,  —  sixty 
per  cent  or  something  of  the  kind,  —  suffices  to  bring  about,  not 
indeed  complete  control  of  price,  but  an  overshadowing  influence. 
It  is  possible  that,  as  the  advocates  of  combination  assert,  the 
conditions,  though  somewhat  different  from  those  of  competition, 
are  not  worse,  but  better.  They  may  be  conditions  of  greater 
stability,  and  yet  not  of  prices  "  unreasonably  "  high.  Without 
entering  on  the  moot  questions  thus  raised,  we  may  accept  this 
part  of  the  evidence  as  indicating  the  continuance  under  the 
Steel  Corporation  of  some  degree  of  monopolistic  control  of  the 
tin  plate  industry. 

But  quasi-monopoly  and  its  corollary,  discrimination  in  favor 
of  foreign  purchasers,  was  not  the  only  factor,  perhaps  not  the 
main  factor,  in  the  tin  plate  exports.  After  all,  there  was  not 
complete  monopoly,  but  only  some  approach  to  monopolistic 
conditions;  profits  doubtless  above  the  competitive  rate,  but  not 
profits  so  high  as  to  leave  a  great  margin  for  reductions  in  favor 
of  one  or  another  buyer.  Though  some  shaving  in  price,  some 
acceptance  of  profits  lower  than  those  got  at  home,  might  facili- 
tate exports,  cost  of  production  and  minimum  price  must  have 
been  brought  within  the  neighborhood  of  the  cost  and  of  the  prices 
of  those  rival  producers  who  must  be  met  in  the  foreign  markets. 
Tin  plate,  or  anything  else,  would  not  be  sold  abroad  at  a  loss; 
if  it  could  be  sold  abroad  at  low  prices,  it  must  be  produced  at 
low  cost.  Such  must  be  the  situation  if  the  dumping  is  continu- 
ous, not  sporadic.  Was  the  cost  of  tin  plate  lowered  within  the 
country  ?  Were  improvements  in  production  made,  of  a  kind 
not  found  elsewhere  ?  Did  the  American  industry  progress,  not 
merely  in  volume,  but  in  technical  efficiency  as  well  ? 


PROTECTION  AND  COMBINATIONS  1 85 

These  questions,  already  considered  with  regard  to  the  cruder 
forms  of  iron  and  steel,  arise  also  for  the  two  processes  by  which 
bars  are  converted  into  sheets  and  then  coated  with  tin,  —  rolling 
and  tinning.  Both  had  been,  through  the  nineteenth  century, 
largely  of  a  handicraft  character.  Though  the  bars  were  passed 
through  rolls  under  power,  more  hand  labor  seems  to  have  been 
involved  in  tending  and  operating  the  rolls  than  in  other  parts  of 
the  iron  and  steel  industry.  Tinning  was  even  more  distinctly 
a  handicraft  operation;  the  sheets  were  hand-dipped.  When 
the  McKinley  Act  was  passed  in  1890,  the  tin  plate  mills  first 
established  in  the  United  States  were  copied  from  the  Welsh. 
Sometimes  the  whole  equipment,  —  rolls,  shears,  pots,  —  was  im- 
ported, and  then  was  operated  by  Welshmen  also  brought  over. 
This  sort  of  literal  transmigration  of  industry  has  not  infre- 
quently taken  place  after  our  imposition  of  heavy  import  duties. 
And  when  it  happens,  and  so  long  as  there  is  mere  transmigra- 
tion, the  need  for  protection  persists.  There  is  then  no  compara- 
tive advantage;  the  thing  is  done  no  better  in  the  United  States 
than  abroad;  and,  wages  being  higher  here,  the  expenses  of  pro- 
duction are  also  higher,  and  the  American  manufacturer  cannot 
hold  his  own  without  protection.  It  is  the  next  stage  that  is  of 
more  concern  to  the  economist.  The  industry  feels  the  influence 
of  new  surroundings.  Machinery,  labor-saving  devices,  inven- 
tions and  short  cuts,  are  in  the- air.  Some  changes  from  the  old- 
world  methods  will  not  fail  to  be  made.  The  question  is  whether 
these  changes  will  be  great  enough  really  to  transform  the  indus- 
try, and  bring  it  up  to  the  same  level  of  effectiveness  as  the 
dominant  American  industries.  Possibly  it  too  will  come  to 
have  a  comparative  advantage;  and  the  object  of  protection  to 
young  industries  will  then  have  been  attained. 

The  evidence  on  this  subject  is  not  easily  interpreted.  It  is 
difficult  to  make  out  whether  a  real  transformation  followed  the 
transmigration  of  the  tin  plate  manufacturer.  If  English  writers, 
technical  and  non-technical,  are  to  be  believed,  the  Welsh  in- 
dustry had  fallen  into  ruts,  and  remained  so  for  some  time  even 
after  the  shock  from  the  loss  of  the  American  market;  whereas 
the  Americans  promptly  went  ahead  with  new  machines,  larger 


1 86         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

plants,  better  organization  of  labor.  Allowance  must  be  made, 
when  reading  all  such  British  jeremiads,  for  the  desire  to  stir  up 
John  Bull,  the  tendency  to  overpraise  the  foreigner  as  a  means  of 
arousing  the  man  at  home.  It  must  be  admitted,  too,  that 
engineers  and  employers  lay  stress  on  all  bad  things  in  the  labor 
unions,  and  sometimes  arouse  suspicion  in  their  insistence  on  the 
opposition  of  the  Welsh  workman  to  labor-saving  devices.  But 
there  remains  a  solid  basis  of  fact  for  these  allegations.  In  the 
Welsh  tin  plate  industry  the  union  long  encouraged,  and  the 
workmen  maintained,  the  policy  of  restricting  output;  and  they 
opposed  labor-saving  devices.  It  would  seem  clear  that  the 
employers  also,  established  as  they  had  long  been  in  apparently 
secure  possession  of  the  tin  plate  trade,  fell  into  a  certain  stolid 
conservatism.     Something  like  stagnation  set  in.1 

In  interpreting  the  evidence  from  the  other  side,  —  that  of  the 
American  manufacturers  and  engineers,  —  there  is  also  need  of 

1  Thus  in  1901,  a  writer  in  the  (English)  Iron  and  Coal  Trades  Review,  May  2, 
1901,  speaks  of  "  labor-saving  appliances  thoroughly  exploited  in  America.  .  .  . 
There  is  not  a  single  point  about  the  Welsh  tin  plate  trade  that  can  be  said  to 
compare  favorably  with  the  American."  It  should  be  said,  however,  that  an 
unmistakable  bias  against  the  trade  unions  runs  through  this  paper.  A  corre- 
spondent of  the  London  Economist  (January  29,  1910)  remarks  that  "  the  English 
manufacturers  sullenly  clung  to  their  old  methods  "  for  a  considerable  period,  but 
"  eventually  scrapped  their  worst  mills  "  and  regained  prosperity.  The  Iron  and 
Coal  Trades  Review  for  March  28,  1913,  printed  an  extended  paper,  read  before  the 
South  Wales  Institute  of  Engineers,  by  Mr.  H.  Spence  Thomas,  in  which  the 
Welsh  industry  is  described  and  some  comparison  made  with  the  American.  "  Am- 
erican practice  gives  1,500  to  2,000  boxes  per  mill  per  week,  whilst  the  English 
average  is  only  half  of  this  quantity."  "  In  America  all  the  pots  are  handled  by 
overhead  cranes,  ...  by  these  mechanical  means  America  is  a  great  way  ahead 
of  the  generality  of  our  English  works."  In  the  discussion  on  this  paper  (p.  488) 
there  was  reference  by  several  speakers  to  the  difficulty  of  introducing  improvements 
in  face  of  the  workmen's  opposition.  One  referred  to  an  episode  in  his  own  ex- 
perience: "  he  put  up  an  electric  crane  to  do  work  for  annealers  that  had  hitherto 
been  done  by  themselves;  yet  not  one  penny  had  been  got  off  the  annealers'  wage 
bill  "  [the  annealers  were  paid  by  the  piece].  Still  another  said  that  "  they  were 
handicapped  by  the  disinclination  of  the  workmen  as  a  whole  to  cooperate.  If 
this  could  be  secured,  he  felt  they  could  do  as  well  in  the  matter  of  output  and 
economy  as  was  now  done  in  America." 

On  the  restriction  of  output  by  the  men  (to  36  boxes  per  eight-hour  shift),  see 
Jones,  The  Tin  Plate  Industry,  pp.  182  seq.  This  limit,  easily  within  their  powers, 
was  slowly  and  reluctantly  given  up,  in  1900-02.  On  opposition  to  labor-saving 
devices,  ibid.,  p.  185;  and  on  American  improvements,  p.  132. 


PROTECTION  AND  COMBINATIONS  1 87 

caution.  These  witnesses  blow  hot  and  cold.  At  one  moment 
patriotic  pride  and  a  wish  to  prove  how  deserving  is  their 
industry  lead  them  to  descant  on  the  improvements  they 
have  introduced  and  on  the  superiority  of  their  ways  over  the 
foreigners'.  In  the  next  breath  —  when  the  tariff  is  mentioned  — 
they  will  assert  that  they  have  no  superiority  at  all,  that  their 
machines  and  processes  are  quite  the  same  as  in  Wales,  that 
their  wages  are  twice  as  high,  and  that  they  will  infallibly  be 
ruined  by  a  cut  in  the  duties. 

It  would  seem  beyond  question  that  some  considerable  im- 
provements were  made  by  the  American  tin  plate  makers.  Welsh 
implements  and  methods,  though  copied  slavishly  at  the  outset, 
were  not  long  retained  without  change.  Gradually  the  tin  plate 
mills  were  made  more  efficient.  For  example,  the  rolls  were 
increased  in  size  (width)  from  18  inches  to  28  inches.  Overhead 
cranes  operated  by  electric  power  were  introduced  for  handling 
the  material.  Machine  pots  (for  tinning),  with  some  auto- 
matic appliances,  took  the  place  of  hand  pots;  though  the  plates, 
it  is  said,  still  continued  to  be  fed  through  singly  by  hand.  In 
charging  the  annealing  furnaces,  however,  the  hand  method  was 
superseded  by  charging  machinery.  Certain  of  these  changes 
were  in  time  copied  by  the  Welsh  makers;  sometimes  doubtless 
with  the  same  labor-saving  results  as  in  the  United  States,  but  in 
other  cases  (and  these  perhaps  typical)  with  less  success  than  in 
the  originating  country. 

The  spokesmen  for  the  American  manufacturers,  though  they 
admit  the  introduction  of  considerable  improvements,  maintain 
that  in  the  main  rolling  and  tinning  are  still  handicraft  operations. 
If  this  is  true;  if  the  industry  has  not  been  developed  much  be- 
yond the  handicraft  stage;  if  it  is  carried  on  mainly  by  specially 
skilled  workmen,  with  comparatively  little  use  of  machinery  and 
labor-saving  devices,  —  then  it  is  presumably  not  up  to  the 
American  industrial  standard.  It  remains  under  a  comparative 
disadvantage,  and  the  young  industry  has  not  been  nurtured 
with  success.  The  evidence  from  the  general  economic  situa- 
tion, however,  strengthens  the  impression  that  these  expert 
witnesses  understate  their  own  case.      It  seems  to  be  beyond 


1 88        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

question  that  the  lead  has  been  taken  in  the  United  States,  at 
least  for  parts  of  the  industry,  and  that  American  devices  and 
improvements  have  been  copied  in  Wales;  always  an  indication 
not  only  of  progress  on  the  part  of  the  Americans,  but  of  probable 
sustained  superiority.1  There  is  the  evidence,  further,  from  the 
considerable  and  growing  exports,  and  the  parallel  evidence  from 
the  approach  of  the  American  domestic  price  to  the  foreign  level. 
Of  this  last-named  change  there  is  striking  corroboration  in  the  cir- 
cumstance that  the  Standard  Oil  Company  finally  gave  up  the 
purchase  of  imported  tin  plate,  on  which  it  had  so  long  taken  the 
government's  drawback  when  exporting  the  case-oil.  This 
shrewdly  managed  concern  at  last  bought  its  tin  plate  from  the 
domestic  makers,  i.  e.,  from  the  Steel  Corporation:  proof  con- 
clusive that  the  price  was  as  low  as  that  of  the  foreign  plate.2 

On  the  whole,  the  verdict  is  not  unfavorable  to  the  protection- 
ist. It  is  so,  that  is,  on  the  question  of  real  success  in  bringing  the 
new  industry  to  the  stage  of  complete  independence;  from  which 
follows  the  further  conclusion,  not  at  all  welcome  to  the  protec- 
tionists, that  the  occasion  for  retaining  the  duty  quite  ceased. 
Ultimate  independence  was  achieved,  and  achieved  through 
domestic  improvements.  No  doubt  other  factors  cooperated: 
the  cheapening  of  the  raw  material  and  the  world-wide  increase 
in  the  demand  for  tin  plate.  The  unrelenting  free  trader  may 
indeed  maintain  that  these  factors  would  have  led  in  any  case  to 
the  same  outcome.  American  invention  and  improvement,  he 
may  say,  exercised  their  influence  in  every  direction,  and  would 
have  done  so  in  the  tin  plate  industry  under  any  circumstances. 
It  is  no  more  possible  to  disprove  the  free  trader's  contention 
than  it  is  to  prove  beyond  cavil  that  of  the  protectionist.     The 

1  Mr.  Jones,  in  his  excellent  book  on  the  Tin  Plate  Industry  (pp.  99,  100),  is 
disposed  to  admit  that  protection  to  young  industries  was  in  this  case  applied  in 
the  United  States  with  success;  and  adds  that  "  if  in  spite  of  the  difference  in  the 
general  level  of  prices  in  the  two  countries,  the  money  costs  of  production  differ 
so  little,  it  is  obvious  that  the  net  amount  of  human  energy  employed  in  tin  plate 
manufacture  is  much  lower  in  America  than  in  Wales." 

2  I  have  come  across  nothing  to  indicate  whether  the  Standard  Company  got 
a  rebate  or  "  drawback  "  from  the  Steel  Corporation,  such  as  the  latter  concern 
gives  to  manufacturers  who  use  its  products  in  export  business.  Presumably  it 
secured  the  "  drawback,"  like  others. 


PROTECTION  AND  COMBINATIONS  1 89 

difficulties  in  the  way  of  exact  proof  remain  for  this  inquiry,  as 
they  do  for  almost  every  concrete  investigation  in  the  economic 
field.     But  the  protectionist  has  a  strong  case. 

On  the  other  question  also,  that  of  the  development  of  trusts 
under  protection,  the  free  traders  have  often  overstated  their  case. 
Surveying  the  course  of  events  in  the  three  industries  for  which 
the  connection  between  protection  and  combination  has  been 
considered, — steel  rails,  tin  plate,  and  sugar  refining,1  — the 
outcome  cannot  be  said  to  confirm  the  doctrine  that  the  tariff 
nurtures  monopolies  permanently.  Protective  duties  high 
enough  to  shut  out  foreign  competition  do  tempt  to  the  forma- 
tion of  a  combination;  and  they  do  make  it  easier  for  the  com- 
bination, when  formed,  to  raise  prices  and  secure  abnormal 
profits.  This  happened  conspicuously  in  the  cases  of  refined 
sugar  and  of  tin  plate;  it  happened,  less  conspicuously,  in  the 
earlier  stages  of  the  steel  rail  industry.  There  is  here  no  small 
charge  in  the  debit  account  against  protection.  But  in  the  long 
run  the  situation  did  alter:  no  one  of  the  combinations  was  able 
to  maintain  indefinitely  a  price  raised  by  the  full  extent  of  the 
duty.  Domestic  competition  did  set  in,  and  brought  the  profits 
and  prices  much  below  the  level  which  full  exploitation  of  the 
tariff  would  have  caused.  This  domestic  competition  was  no 
doubt  a  halting  and  restricted  one.  A  combination  price,  some- 
what akin  to  a  monopoly  price,  was  long  maintained.  Yet  even 
this  price  was  subject  to  the  influences  of  domestic  cost,  and 
to  the  indirect  action  of  competition  as  well  as  to  its  direct. 
Gradually  the  effect  of  the  protective  tariff  in  supporting  com- 
bination melted  away,  and  the  trust  problem  presented  itself 
unveiled  and  bare.  Such  is  likely  to  be  the  general  drift.  The 
industrial  influence  of  the  protective  tariff  tends  to  become  less 
and  less;  but  the  march  of  great-scale  production  proceeds 
apace.  Whether  or  not  the  tariff  system  is  radically  altered, 
the  economic  and  political  problems  of  the  future  will  be  much 
the  same,  —  great  social  problems,  that  will  dominate  the 
public  life  of  the  country  for  generations  to  come. 

1  On  the  sugar  refining  trust,  see  above,  chapter  viii,  pp.  100-1 14. 


190        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 


STATISTICS  ON  TIN  PLATE 


Domestic  Product 
(in  1 ,000  tons) 

Imports 
(1,000  tons) 

Exports  of 
Domestic 
Tin  Plate 

(1,000  tons) 

Proportion  of 

Product  by 

Steel  Corporation 

(Per  cent) 

1890 

329.O 

1891 

I 

327-9 

has 

1892 

18.8 

268.5 

1893 

55-2 

253-1 

som 

1894 

74-3 

215.O 

1895 

H3-7 

219-5 

B 

1896 

160.4 

119. 2 

1897 

256.6 

83.8 

app 

1898 

326.9 

67.2  ' 

anc 

1899 

360.9 

58.9 

1900 

302.7 

60.4 

1901 

399-3 

77-4 

73-i 

1902 

360.0 

60.1 

1 

71.4 

1903 

480.0 

47-4 

1 

76.4 

■ 

1904 

461. 1 

70.6 

4 

71.4 

1905 

493-5 

65-7 

11 

7i-3 

1906 

577-6 

57-o 

12 

73-5 

sit 

1907 

514.8 

57-7 

20 

72.6 

0 

1908 

537-1 

58.5 

17 

71. 1 

Y- 

1909 

612.0 

62.6 

5 

61.9 

1910 

722.8 

66.6 

13 

61. 1 

1: 

1911 

784.0 

14.1 

35 

60.0 

th 

1912 

963.0 

2.0 

76 

60.0 

These  figures  are  for  calendar  years;  they  are  taken  from  the 
Statistical  Reports  of  the  American  Iron  and  Steel  Association. 
They  include  terne  plate  as  well  as  tin  plate  proper.  The  tons 
are  gross  tons  (2,240  lbs.). 

1  In  1898,  and  thereafter,  virtually  all  the  imported  tin  plate  was  reexported 
under  drawback. 


CHAPTER  XIII 

IMPORTS  AND   EXPORTS  —  DUMPING 

Another  phase  in  the  development  of  the  American  iron  trade 
has  been  the  relation  of  imports  to  exports;  the  persistence  of 
some  imports,  the  extraordinary  growth  during  the  present  cen- 
tury of  the  exports. 

Here  we  find  the  perplexing  phenomenon  that  commodities 
apparently  of  the  same  sort  are  both  brought  into  the  country 
and  sent  out  from  it.  Cross  currents  of  the  same  kind  are  to  be 
seen  in  the  international  trade  of  other  nations.  They  are  most 
conspicuous  in  Great  Britain,  where  complete  free  trade  makes 
possible  the  importation  of  a  very  varied  list  of  articles.  Cotton 
goods4  woolens,  silks,  iron  manufactures  are  among  both  the 
exports  and  the  imports  of  the  United  Kingdom.  The  same 
situation  appears,  though  less  conspicuously,  in  protectionist 
countries  like  Germany  and  France:  these  also  have  both  im- 
ports and  exports  of  textiles,  —  cottons,  woolens,  silks,  —  and  of 
metal  products.  The  phenomenon  is  perhaps  least  noticeable  in 
the  foreign  commerce  of  the  United  States,  because  of  the  restric- 
tions on  our  imports  from  a  long-continued  policy  of  high 
protection.  But  it  has  long  been  seen  in  the  iron  trade.  Manu- 
factures of  iron  and  steel  have  been  steadily  brought  into  this 
country  and  sold  here,  even  in  the  face  of  considerable  duties; 
and  yet  manufactures  of  iron  and  steel  have  also  been  steadily 
sent  out  of  the  country,  and  sold  in  the  open  foreign  market.  The 
continuing  imports  would  seem  to  show  that  the  articles  are 
dearer  in  the  United  States;  the  continuing  exports  that  they  are 
cheaper  in  the  United  States.  How  can  both  sorts  of  trade  go 
on  steadily  side  by  side  ? 

Some  explanation  no  doubt  is  found  in  the  varying  accessi- 
bility of  the  widely  separated  parts  of  a  vast  country.  It  is 
quite  possible  that  pig-iron  should  be  sent,  in  face  of  a  duty,  from 
Great  Britain  to  the  Atlantic  seaboard,  when  the   dominant 

IQI 


192         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

domestic  center  of  production  is  in  the  heart  of  the  interior,  and 
is  handicapped  by  a  long  stretch  of  land  transportation;  and 
that  nevertheless  pig-iron  should  be  exported  from  that  same 
interior  region  across  the  Great  Lakes  into  Upper  Canada.  Simi- 
larly, it  is  easy  to  see  why  coal  should  figure  among  both  the 
exports  and  imports  of  the  United  States.  Coal  moves  natu- 
rally from  the  mines  of  Nova  Scotia  to  New  England,  and  from 
those  of  British  Columbia  to  our  Pacific  northwest;  it  also 
moves  naturally  from  Pennsylvania  and  other  central  states,  — 
not  only  the  anthracite,  which  is  virtually  a  distinct  commodity, 
but  bituminous  coal  as  well,  —  across  the  Lakes  into  Upper 
Canada. 

But  some  other  explanation  than  the  simple  geographical  one 
must  be  found  for  the  currents  of  trade  which  are  most  significant. 
Large  quantities  of  manufactures  of  iron  and  steel  move  in  and 
out  of  the  very  same  regions  and  the  very  same  ports;  they  seem 
to  move  side  by  side  in  contrary  directions.  Where  phenomena 
of  this  sort  appear,  we  may  be  certain  that  the  commodities 
which  cross  each  other  are  not  in  reality  the  same.  They  may 
have  the  same  label  in  the  custom  house  returns,  —  they  may 
all  be  classified  as  "  manufactures  of  iron  and  steel,"  —  but  they 
are  industrially  different.  This  must  be  the  case,  too,  when 
woolens  are  imported  into  Great  Britain  and  also  exported  from 
that  country.  What  really  happens  is  that  some  kinds  of  woolens 
are  imported  and  other  kinds  exported.  So  in  the  United  States; 
what  happens  is  that  some  manufactures  of  iron  and  steel  are 
imported,  and  that  other  manufactures  are  exported.  What 
kinds  go  in  and  what  kinds  go  out  ?  This  is  the  question  of 
interest;  and  it  can  be  answered,  in  my  judgment,  only  in  the 
light  of  the  principle  of  comparative  advantage. 

The  general  trend  of  the  imports  and  exports  during  the  period 
1870-1913  is  indicated  on  Chart  V  (see  next  page).  The  total 
imports  classed  as  "  manufactures  of  iron  and  steel  "  remained 
on  the  whole  fairly  constant  in  amount.  It  is  true  that  in  the 
early  part  of  the  period  there  were  years  when  the  imports  rose 
to  unusual  dimensions.  This  was  the  case  very  strikingly  in 
1871-73  and  again  in  1881-83, — years  of  unusual  and  feverish 


IMPORTS  AND  EXPORTS  —  DUMPING 


J93 


activity,  preceding  financial  crises.  Indeed,  there  is  throughout 
an  oscillation,  such  as  one  would  expect,  between  periods  of 
activity  and  depression.  But  looking  over  the  forty  years  as 
a  whole,  one  finds  no  clear  tendency  to  a  steady  increase  or  de- 
crease of  the  imports.  With  the  exports,  the  case  is  strikingly 
different.  They  grew  very  greatly,  especially  after  1890.  Until 
that  year,  though  continuous  and  considerable,  they  were  less 


Chart  V 


Millions  of 
Dollars 


i 

300 

/ 

280 

/ 

Imports  and  Exports  of 
Manufactures  of  Iron  and  Steel 

i„       1        Imports 

/ 

1 

2bU 

/ 

/ 

j!4U 

/ 

220 

/ 

{ 

2UU 

/ 

180 

/ 

\ 

/ 

160 

\ 

/ 

\ 

I4U 

I2U 

100 

tu 

,' 

> 

\ 

/ 

\ 

y 

\ 

till 

/ 

/ 

\ 

t 

\ 

K 

K 

> 

/ 

— - 

■ns 

• 

\ 

/ 

40 

\ 

1 

,^- 

V 

\ 

(f 

/ 

\ 

\ 

V-V 

"  \ 

/ 

\ 

\ 

s 

— " 

■^ 

/ 

2U 

y 

~~" 

V 

-- 

f 

10 

1870 '72    "74    '76     *78    '80   '82    '84    '86    '88    '90    '92    '94    '96  '98    1900  '02   '04     '06    '08    '10    '12    'H 


than  the  imports.  After  1890,  they  increased  rapidly,  and 
by  the  close  of  the  decade  much  exceeded  the  imports.  After 
1900  they  increased  even  more  rapidly,  and  attained  very  great 
dimensions.  In  the  closing  year  of  the  decade  (1910)  they 
amounted  to  over  $200,000,000,  and  in  the  very  last  year  here 
recorded  (1913)  even  exceeded  $300,000,000.  Iron  and  steel 
came  to  be  among  the  great  articles  of  export  from  the  United 
States. 

The  exports  of  iron  and  steel  fall  into  two  classes.  First,  those 
of  the  more  highly  manufactured  articles,  very  various,  and  made 
by  many  and  scattered  producers.  These  began  to  go  out  even 
before  1870,  and  continued  to  be  sent  to  foreign  countries  through 


194        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

the  whole  period.  The  trade  expanded  steadily  though  slowly  in 
1870-1890,  and  very  rapidly  after  1890.  Second,  the  exports  of 
the  heavier  and  less  highly  manufactured  forms,  such  as  steel  in 
ingots,  and  shapes,  wire,  rails  and  structural  material::  These 
went  out  in  considerable  quantities  during  the  latter  part  of  the 
decade  1890-1900,  and  in  still  greater  quantities  after  1900. 
They  have  been  largely  sold  to  the  foreigners  by  the  great  Steel 
Corporation.  Moreover,  many  of  them  have  been  deliberately 
and  steadily  sold  at  lower  prices  than  those  for  the  domestic 
market.  They  have  been  "  dumped,"  and  they  raise  the  general 
questions  connected  with  dumping. 

The  first  group  contains,  as  already  intimated,  a  varied  and 
miscellaneous  set  of  commodities.  Among  them  are  builders' 
hardware,  saws  and  tools,  machinery,  cash  registers,  typewriters, 
sewing  machines,  electrical  machinery  and  apparatus,  locomo- 
tives. In  the  same  group  belong  (though  not  included  among 
"  iron  manufactures  "  in  the  Treasury  statistics)  agricultural 
implements  and  machinery,  of  which  the  exports  in  the  decade 
1900-1910  ranged  from  20  to  30  millions.  All  these  articles  have 
been  sold  to  foreigners,  year  in  and  year  out,  through  several 
decades.  They  have  not  been  deliberately  dumped;  neither 
have  they  been  sold  sporadically,  or  under  exceptional  conditions. 
They  have  been  .exported  continuously  in  large  quantities  by 
many  competing  manufacturers.1 

For  J:his  sort  of  trade  there  can  be  only  one  explanation.  The 
things  are  made  cheaper  by  Americans  than  by  their  foreign 
competitors,  and  therefore  sold  cheaper.    In  them  we  have  a  com- 


1  The  exports_of_certain  kinds  of  iron  and  steel  implements  are  given  below  for 
selecied-yeariT  The  figures  are  taken  from  the  Statistical  Reports  of  the  American 
Tron  and  Steel  Association,  and  are  for  calendar  (not  fiscal)  years.  The  figures 
are  not  given  with  regularity  in  the  Reports,  nor  in  much  detail  for  the  earlier 
period;  hence  the  apparently  arbitrary  selection  of  years.  They  stand  for  millions 
of  dollars  (3.2  =  $3,200,000). 

Exports  of                                                     1872  1877  1890  1895  1904  1910 

Machinery  not  otherwise  specified ..  .       3.2  3.5  9-4  I2-1  22-°  £5-2 

Saws  and  tools  ("edge-tools"  for  1877)        ..  .9  i-8  2.0  5-6  8.5 

Builders' hardware ..  2-i  2-8  5-S  7-3 

Sewing  machines 2.4  1.6  2.9  3.0  6.0  8.1 

Locomotives -6  1.0  2.1  4.7  2.8 

Agricultural  implements 1.7  2.0  3.3  5-3  2I-6  31-3 


IMPORTS  AND  EXPORTS —  DUMPING  1 95 

parative  advantage.  Though  paying  higher  wages  than  Euro- 
pean competitors,  the  American  manufacturers,  by  producing 
more  effectively,  turn  out  their  goods  at  lower  money  price.  The 
variety  of  the  causes  of  effectiveness  in  this  case  illustrates  what 
was  said  in  the  introductory  Part !  on  the  intricacies  of  the  prin- 
ciple of  comparative  cost.  Mechanical  skill  and  ingenuity  among 
the  inventors  and  technical  directors;  organizing  and  managing 
capacity  among  the  business  leaders;  steady  and  intelligent 
operation  of  the  machinery  on  the  part  of  the  rank  and  file  in 
the  workshops,  —  all  these  count.  I  suspect  that  mechanical 
ingenuity  is  the  most  important  factor.  Much  also  is  due  to  the 
marked  ability  of  the  American  business  man  in  managing  a  well- 
devised  plant  and  turning  out  steadily  a  large  quantity  of  uni- 
form, standardized,  perfected  articles.  It  is  significant  that  tools 
and  implements  of  all  kinds,  made  in  turn  with  much  use  of  other 
tools  and  implements,  form  the  largest  items  in  these  exports. 

These  things  are  cheaper  in  the  United  States  than  in  foreign 
countries;  this  explains  why  they  are  exported.  But  cheapness 
may  mean,  not  absolutely  lower  price,  but  better  quality,  —  price 
low,  having  regard  to  quality.  American  sewing  machines  and 
agricultural  implements  may  not  be  lower  in  price  than  foreign, 
but  they  are  more  advantageous  at  the  same  price  or  even  at  a 
higher  price.  Such  I  suspect  to  be  the  case  with  the  American 
locomotives,  which  are  sent  out  in  such  considerable  quantities. 
Our  own  geographical  and  industrial  situation,  and  the  skill  which 
our  people  have  long  shown  in  adapting  transportation  methods 
to  long  hauls  and  thin  traffic,  have  caused  locomotives  to  be 
developed  which  are  fitted  for  use  in  other  countries  where  the 
traffic  conditions  are  similar.  But  it  does  not  matter  what  form 
the  superiority  of  the  American  article  takes,  whether  that  of 
absolute  cheapness  or  of  cheapness  relatively  to  quality.  In 
either  case  there  is  proof  of  effectiveness  in  the  application  of 
American  labor.     To^repeat,  there  is  a  comparative  advantage. 

During  the  period  before  1895  the  exports  of  these  manufac- 
tures were  impeded  in  some  degree  by  the  fact  that  the  most 
important  materials  used  —  the  crude  iron  and  steel  —  were 

1  Chapter  iii,  pp.  37~45- 


I96         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

dearer  in  the  United  States  than  in  competing  countries.  That 
the  exports  went  on  notwithstanding  this  obstacle  is  in  itself 
striking  proof  of  the  superiority  developed  by  the  American  pro- 
ducers who  made  the  articles  from  these  dearer  materials.  As 
we  have  seen,  crude  iron  and  steel  became  cheaper  in  the  United 
States  after  1895;  often  quite  as  cheap  as  in  foreign  countries, 
and,  if  dearer  at  all,  only  by  an  excess  small  as  compared  with 
that  of  the  previous  period.  It  is  natural,  therefore,  that  these 
exports  should  have  grown  rapidly.  No  doubt,  other  causes  also 
contributed  to  the  growth,  —  still  further  development  in  inven- 
tion and  organization,  and  the  general  economic  causes  which 
have  led  to  a  check  in  the  exports  of  agricultural  produce  and  to 
an  increase  in  those  of  manufactures.  The  increase  at  all  events 
was  striking,  and  confirms  beyond  question  the  conclusion  that 
these  exports  rest  on  a  well-established  superiority  in  the  effec- 
tiveness of  American  industry. 

Among  the  curiosities  of  tariff  experiences  is  the  attitude  which 
the  manufacturers  of  these  exported  articles  often  take  toward 
the  tariff.  It  is  nothing  less  than  a  curiosity.  One  would  expect 
them  to  be  at  the  least  indifferent  to  the  protective  system.  Yet 
commonly  enough  they  appear  among  its  advocates.  Many  of 
them  are  found  to  join  the  procession  of  persons  who  appear 
before  tariff  committees  and  commissions  and  plead  for  the  re- 
tention of  high  duties.  The  main  explanation  probably  is  the 
general  state  of  trepidation  engendered  by  a  long-continued 
policy  of  protection,  —  the  constant  proclaiming  of  the  dangers 
of  foreign  competition,  and  the  parading  of  the  pauper  labor 
argument,  which  always  seem  to  strike  a  chill  of  terror  into 
employers  as  well  as  employed.  Mere  ignorance  of  what  is  really 
the  situation  in  other  countries,  and  lack  of  capacity  or  training 
for  seeing  anything  but  the  surface  phenomena,  play  no  small 
part.  Competition  of  any  sort  is  unwelcome  enough;  competi- 
tion from  foreigners  seems  always  to  be  regarded  with  peculiar 
dread.  Even  though  domestic  producers  in  fact  have  nothing 
to  fear  from  it,  the  constant  vaunting  about  the  dangers  from 
foreign  competition  leads  to  a  demand  for  the  retention  of 
supposed  safeguards.     One  of  the  unfailing  concomitants  of  a 


IMPORTS  AND  EXPORTS  —  DUMPING  1 97 

long-established  protective  tariff  is  that  though  duties  may  be 
needlessly  high  for  the  exclusion  of  foreign  competitors,  reductions 
will  be  vehemently  resisted ;  and  that  even  when  the  duties  are  of 
no  effect  at  all,  —  nothing  more  than  empty  phrases  inscribed  on 
the  statute-book,  —  their  abolition  will  be  no  less  vehemently 
resisted.  Such  we  shall  find  to  be  the  case  with  some  of  the  duties 
on  textiles,  presently  to  be  considered.  Such  was  the  case  with 
duties  on  grain  and  other  agricultural  products.  The  same  state 
of  vague  apprehension  goes  far  to  explain  the  opposition  of  the 
manufacturers  who  export  tools  and  implements  to  the  pruning  of 
duties  on  their  products. 

A  typical  situation  is  that  with  regard  to  "  machine  tools," 
/.  e.,  tools  for  working  metals.  They  are  invented  and  perfected 
in  the  United  States  beyond  the  stage  attained  elsewhere,  and 
are  steadily  exported  in  large  quantities.  The  makers  of  such 
tools  accepted  without  opposition  a  reduction  in  the  rate  of  duty 
in  the  tariff  act  of  1909  (from  the  previous  duty  of  45  per  cent  to 
one  of  30  per  cent  in  1909)  but  protested  against  further  reductions 
in  later  years,  nay  even  intimated  a  regret  at  having  accepted  the 
reduction  of  1909.  Though  the  imports  were  insignificant,  and 
the  exports  considerable,  the  domestic  manufacturers  were  fearful 
of  the  consequences  of  free  admission.  In  part  they  seem  to  have 
been  influenced  by  a  fear  that  their  tools,  after  being  exported, 
would  be  imitated  abroad,  and  then  sent  back  at  lower  prices,  to 
plague  their  very  inventors.  But  their  own  testimony  was  that 
the  American  makers  continued  to  keep  steadily  in  the  van,  and 
to  forge  ahead  as  rapidly  as  foreign  rivals  pressed  on  behind  them. 
No  better  illustration  could  be  found  of  the  non-physical  causes 
of  a  comparative  advantage.  The  superiority  of  the  Americans 
rests  solely  on  ingenuity,  skill,  constant  progress.  It  is  at  once 
an  effect  and  a  cause  of  the  machine-using  bent  in  the  community 
at  large.  This  bent  has  aroused  a  demand  for  machines  for 
making  machines,  i.  e.,  for  these  metal- working  tools;  and  the 
high  quality  and  comparative  cheapness  of  these  tools  has  in 
turn  promoted  the  cheapness  and  the  wide  use  of  the  most 
various  sorts  of  labor-saving  implements.  And  yet,  notwith- 
standing the  clear  superiority  of  the  domestic  producers,  shown 


I98         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

not  only  by  the  large  exports,  but  by  the  pride  of  the  producers 
in  their  position  in  the  international  market,  these  very  per- 
sons showed  themselves  uneasy  at  the  prospect  of  open  competi- 
tion with  the  foreigners.1 

An  examination  of  the  details  in  particular  cases  often  shows 
that  here  also  there  are  cross-currents;  that  some  tools  or  ma- 
chines are  imported,  while  others  are  exported;  and  that  the 
superiority  of  the  American  producer  does  not  always  extend 
through  the  whole  range  of  the  particular  industry.  And  yet 
these  apparent  exceptions  will  usually  be  found  not  to  run 
counter  to  the  principle  of  comparative  costs,  but  rather  to 
illustrate  it. 

Thus,  while  sewing  machines  are  exported  in  great  quantities, 
some  sewing  machines  are  imported.  The  familiar  machine  for 
domestic  use  is  made  in  the  United  States  more  cheaply  than  in 
foreign  countries,  even  though  the  machinery  and  the  methods 
in  the  latter  seem  to  be  quite  the  same  and  money  wages  and 

1  The  total  production  of  machine  tools  in  the  United  States  was  in  1909  about 
$40,000,000  in  value,  the  exports  $4,500,000,  the  imports  $200,000.  (Senate  Hear- 
ings of  1 91 2,  p.  128.)  In  these  same  Hearings,  the  manufacturer  who  spoke  for 
the  machine  tool  makers  remarked: 

"  The  American  engineer,  with  his  inventive  ability,  supported  by  the  progres- 
sive and  aggressive  spirit  and  enterprise  of  American  capital,  was  the  pioneer  in 
bringing  the  modern  machine  tool  to  its  present  high  productive  capacity.  He  not 
only  gave  to  American  industry  in  all  its  forms,  but  also  to  the  industries  of  the 
world,  the  instruments  by  means  of  which  the  cost  of  all  manufacturing  has  been 
greatly  reduced.  ...  As  one  characteristic  of  the  American  tool  builder,  he  is 
constantly  inventing  and  perfecting  new  machinery,  to  his  credit;  he  takes  the 
lead  in  the  world  along  the  line  of  creating  new  machinery."  (P.  177.)  And  yet 
he  presently  said  (p.  182): 

"  We  are  claiming  that  our  exports  to  Europe  are  largely  confined  to  highly 
specialized  and  highly  organized  machines,  such  as  are  not  as  yet  made  to  com- 
pete with  the  German  machine;  that  the  Europeans  are  making  excellent  machines 
of  the  kind  and  type  that  we  shipped  over  there  ten  years  ago;  that  they  are 
manufacturing  those  machines  today  at  a  cost  very  much  under  ours,  and  the 
removal  of  the  tariff  would  not  bring  into  this  country  immediately  the  highly 
organized  machines,  because  they  are  not  making  them  over  there,  but  it  would 
bring  into  this  country  a  type  of  machine  which  probably  seventy-five  per  cent 
of  this  trade  is  engaged  today  in  making." 

See  also  the  instructive  testimony  of  the  manufacturers  of  printing  presses  con- 
cerning the  imitation  of  exported  American  presses,  with  the  usual  jeremiads  about 
the  disasters  to  be  expected  when  these  should  be  made  with  foreign  cheap  labor; 
ibid.,  pp.  271,  273. 


IMPORTS  AND  EXPORTS  —  DUMPING  1 99 

expenses  are  lower.1  But  certain  special  machines,  —  for  em- 
broideries and  for  factory  work,  —  continue  to  be  imported.  The 
explanation  seems  to  be  that  few  of  any  particular  kind  are 
wanted;  the  processes  of  manufacture  cannot  be  standardized; 
the  turning  out  of  interchangeable  parts  by  the  thousand  is  not 
feasible.  Handwork  is  called  for  in  greater  degree.  Under  such 
conditions  the  special  advantage  of  the  American  producer  dis- 
appears. The  situation  is  a  familiar  one.  Where  ingeniously 
perfected  machinery  can  be  applied  in  large-scale  operations, 
the  American  is  likely  to  hold  his  own;  but  where  handicraft 
skill  is  needed  for  a  special  article,  he  cannot  compete  with  a 
country  where  such  skill  is  as  great  and  where  current  wages  are 
lower.2 

Similarly,  knitting  machines  are  both  imported  and  exported. 
A  circular  automatic  machine  has  been  perfected  in  the  United 
States,  and  is  widely  made  here  and  used  for  the  commoner  and 
cheaper  grades  of  cotton  knit  goods;  it  is  even  exported.  But  a 
very  elaborate  German  machine  for  knitting  full-fashioned  goods 
continues  to  be  imported;  because  the  fabrics  for  which  it  is 
used  are  more  expensive,  less  quantities  are  bought,  and  hence 
fewer  of  the  knitting  machines  are  used.  Made  as  they  are  in 
comparatively  small  quantities,  the  machines  are  turned  out 
more  cheaply  in  Germany,  and  most  of  them  are  imported;  and 
yet  none  of  the  widely  used  circular  machines  are  imported.3 

1  An  American  manufacturer  of  sewing  machines,  testifying  before  a  tariff 
committee  in  191 2,  remarked  that  the  Singer  Sewing  Machine  Company  had  been 
compelled  (by  German  duties  on  American  machines)  to  manufacture  in  Germany, 
but  found  it  could  not  do  so  as  cheaply  there  as  in  the  United  States.  "  The  plant 
may  be  the  same  and  the  machinery  the  same  and  the  buildings  the  same,  but  the 
conditions  in  each  country  are  not  the  same."  (Hearings  before  the  Senate  Com- 
mittee on  Finance,  1912,  pp.  352-355.)  Similarly  the  International  Harvester  Com- 
pany was  induced  by  German  and  Russian  duties  on  its  American-made  agricultural 
implements  to  establish  factories  for  making  these  same  implements  in  Germany 
and  Russia,  yet  found  it  impossible  to  make  them  as  cheaply  in  these  countries  of 
lower  wages.     I  have  been  assured  of  this  by  officials  of  the  Company. 

2  The  same  manufacturer  (just  referred  to) :  "  I  can  see,  by  examining  the  [Ger- 
man] machine,  the  handwork,  the  parts  that  had  been  filed,  and  the  fact  that  they 
do  not  go  so  far  with  interchangeable  construction  as  we  do  in  this  country." 
Hearings,  p.  355. 

3  See  the  testimony  of  the  one  American  manufacturer  of  the  full-fashioned 
machine,  Senate  Tariff  Hearings  of  191 2,  pp.  919  seq. 


200        SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

Illustrations  are  abundant;  at  the  risk  of  being  tedious,  I  will 
mention  a  few  more.  Anvils  continued  to  be  imported  through 
the  period  of  high  protection,  notwithstanding  a  heavy  specific 
duty.  The  imported  anvils,  made  largely  from  scrap-iron,  are 
hand-welded.  Unless  so  made,  they  do  not  give  an  easy  rebound, 
and  the  blacksmith  who  uses  steadily  one  of  a  different  kind  finds 
his  arm  stiffening  (a  "  glass  arm  ").  Cast-iron  anvils  are  made 
in  the  United  States,  turned  out  in  quantities  from  well-designed 
models.  They  serve  well  enough  when  only  occasional  use  is 
called  for.  Wrought  anvils  are  also  made  in  the  United  States, 
but  of  cheaper  quality  and  in  the  lighter  weights.  For  steady 
blacksmith's  work  the  imported  anvils  are  preferred;  and  they 
have  continued  to  be  imported,  under  high  duties  as  well  as  under 
low.1  Files,  on  the  other  hand,  are  equally  good  whether  turned 
out  by  hand  in  small  quantities  or  by  machine  in  great  quanti- 
ties. The  machine-made  files  have  displaced  the  hand  product, 
except  where  a  few  files  of  special  kinds  are  wanted.  Files  are 
not  only  made  with  success  in  the  United  States,  but  are  exported 
on  a  large  scale;  while  a  few  hand-made  files  of  special  sizes  or 
shapes  continue  to  be  imported.2 

Some  kinds  of  cutlery,  again,  are  steadily  imported;  others 
are  not  imported  at  all.  Pocket  knives  are  brought  in  from 
England  and  from  Germany,  and  one  of  the  curious  manifesta- 
tions of  extreme  protectionist  spirit  during  the  period  1 890-1 909 
was  in  the  elaborate  duties  on  this  article.3  Table  cutlery,  on 
the  other  hand,  is  supplied  by  the  domestic  manufacturer  with- 
out competition  from  the  foreigners;  hence  there  was  no  at- 
tempt to  levy  particularly  high  duties  on  this  kind  of  hardware. 

1  The  anvil  situation  has  been  thus  explained  to  me  by  persons  engaged  in  the 
trade. 

2  Professor  Lloyd,  writing  of  the  English  file  industry  in  his  excellent  book  on 
The  Cutlery  Trade  (1013),  remarks  at  p.  59  that  "hand  cutting  [of  files]  is  likely 
to  survive  for  small  work  and  miscellaneous  orders;  but  while  the  older  process 
still  claims  to  produce  a  superior  article,  it  cannot  be  maintained  that  the  method 
possesses  any  important  advantages,  whether  technological  or  commercial."  An 
American  file  manufacturer  who  exported  a  quarter  of  his  output  to  all  parts  of 
the  world  exhibited  to  a  congressional  committee  a  file  of  which  there  were  con- 
siderable imports;  and,  as  might  be  expected,  this  was  a  "  high  grade  file  ...  on 
which  there  is  very  much  labor."     Senate  Hearings  of  1912,  pp.  481,  482. 

3  See  my  Tariff  History  of  the  United  States,  pp.  343  seq. 


IMPORTS  AND  EXPORTS  —  DUMPING  201 

The  explanation  of  the  difference  between  the  two  groups  is 
clear.  Table  cutlery,  and  more  especially  table  knives,  are 
made  in  great  quantities  of  a  single  pattern.  Automatic  ma- 
chinery, interchangeable  parts,  standard  patterns,  mass  produc- 
tion, —  here  the  Americans  can  outstrip  the  foreigners.  Pocket 
knives,  on  the  other  hand,  are  little  standardized.  There  is 
a  bewildering  variety  of  patterns;  comparatively  small  numbers 
of  any  one  can  be  put  on  the  market.  A  similar  situation  is  found 
in  the  case  of  carving  knives.  The  Sheffield  manufacturer  of 
these  (a  petty  producer  compared  to  the  American  table  knife 
concern)  can  hold  his  own  in  the  American  market  even  in  face 
of  high  duties;  so  can  the  German  "  manufacturer,"  who  is  in 
the  main  a  middleman  conducting  an  industry  still  in  the 
stage  of  the  domestic  system.  Hence  it  is  that  carving  knives, 
unlike  table  knives,  continue  to  be  imported,  vying  with  the 
protected  American  article.  And  for  the  same  reasons,  certain 
kinds  of  pocket  knives  and  carvers  nevertheless  have  complete 
command  of  the  domestic  market,  and  were  not  affected  at  all  by 
the  marked  reductions  of  duty  made  by  the  tariff  act  of  1913,  — 
namely,  those  of  a  standardized  and  staple  sort,  made  in  quanti- 
ties, and  affording  opportunity  for  the  methods  of  production  in 
which  the  American  is  proficient.1 

The  second  group  of  iron  and  steel  products,  —  steel  rails,  pipe, 
sheet  iron,  corrugated  iron,  structural  steel,  wire,  and  the  like,  — 
have  been  exported  since  the  decade  1 890-1 900.  It  was  then 
that  the  revolution  in  the  American  iron  trade  was  accomplished ; 
and  it  was  during  the  severe  depression  of  1893-96,  and  in  conse- 
quence of  the  low  prices  then  ruling  in  the  United  States,  that 
the  exports  of  these  comparatively  heavy  products  set  in.  The 
causes  which  led  to  their  cheapening  and  which  made  it  possible 
to  sell  them  in  foreign  markets  have  been  sufficiently  explained 
in  the  preceding  chapters,  —  rich  and  accessible  mines,  trans- 
portation at  low  rates,  efficient  organization  of  production  on  a 

1  See  Professor  Lloyd's  book,  just  referred  to,  on  The  Cutlery  Trades,  pp.  55,  208, 
387,  on  the  many  patterns  of  pocket  knives  and  the  consequent  difficulty  of  applying 
machine  methods.  Cf.  pp.  40-41,  394,  on  table  knives.  Here  again  I  am  indebted 
for  confirmatory  information  to  persons  engaged  in  the  trade. 


202         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

great  scale,  technical  advances.  They  differ  in  some  respects 
from  the  causes  that  explain  the  exports  of  machinery  and  tools. 
Ingenuity  and  nicety  in  the  finished  product  tell  less,  organization 
of  the  processes  of  production  tells  more.  Yet  in  both  cases  the 
source  of  the  comparative  advantage  has  been  chiefly  in  the 
human  factors,  and  among  these  again  in  the  ability  and  enter- 
prise of  the  business  leaders. 

In  the  second  group,  however,  still  another  factor  has  been  of 
influence:  persistent  and  systematic  development  of  the  foreign 
market  by  the  dominant  Steel  Corporation.  In  that  develop- 
ment, again,  dumping  has  played  a  large  part,  —  deliberate  and 
continuous  sales  to  the  foreigner  at  lower  prices  than  those 
charged  to  the  domestic  purchaser.  Dumping  alone  would  not 
explain  the  phenomenon.  Even  with  the  special  concessions, 
sales  to  the  foreigner  could  hardly  take  place  unless  the  usual 
price  of  the  article  were  close  to  the  export  level.  But  the 
concessions  may  just  make  the  difference;  without  them,  the 
exports  might  not  be  possible;  and  they  raise  the  whole  question 
whether  a  country  gains  from  foreign  sales  brought  about  in 
this  way. 

The  part  played  by  the  Steel  Corporation  has  been  surprisingly 
large.  Great  as  is  the  scale  of  operations  by  some  of  the  other 
iron  and  steel  enterprises,  no  one  of  them  has  undertaken  to 
cultivate  the  foreign  field  with  the  same  enterprise  and  tenacity. 
Before  the  Steel  Corporation  was  formed  some  of  its  constituent 
companies,  —  the  Carnegie,  the  Federal  Steel,  the  American  Wire 
companies,  —  had  established  foreign  agencies  and  had  begun 
export  sales.  In  1903,  —  a  year  of  depression  and  low  prices  in 
the  iron  trade,  —  a  special  subsidiary  company  of  the  Steel  Cor- 
poration, the  United  States  Steel  Products  Company,  was  formed 
for  handling  all  of  its  foreign  business.  The  business  done  by 
that  Company  has  been  by  the  million.  It  had  (in  191 2)  some 
fifty-eight  foreign  offices,  and  large  warehouses  in  England,  South 
America,  Australia,  South  Africa;  it  possessed  a  fine  of  steam- 
ships of  its  own,  and  operated  others  under  charter.  Its  export 
sales  included  steel  rails,  structural  steel,  pipe,  wire,  sheet-iron, 
and  in  recent  years  tin  plate.     Some  of  these  articles  were  ex- 


IMPORTS  AND  EXPORTS —  DUMPING  203 

ported  by  other  companies  also,  such  as  steel  rails  and  structural 
steel;  but  none  operated  on  a  scale  comparable  to  that  of  the 
Steel  Corporation.1  Some  goods  were  sold  abroad  at  prices  no 
less  than  those  at  home,  —  i.  e.,  were  not  dumped  at  all.  Among 
those  were  fencing  wire,  especially  barbed  wire,  —  a  peculiarly 
American  product,  comparable  to  the  iron  and  steel  manufac- 
tures of  our  first  class.  But  it  seems  that  ordinarily  the  sales  to 
foreigners  were  at  reductions  from  the  current  domestic  rates. 
One  curious  form  of  dumping  was  that  of  "  allowances  "  to  domes- 
tic manufacturers  who  bought  material  from  the  Steel  Corpora- 
tion for  use  in  making  articles  which  those  manufacturers  later 
exported,  such  as  machinery,  boilers,  agricultural  implements,  or 
"  containers  "  (e.  g.,  tin  plate  for  canned  goods).  Such  manu- 
facturers, on  proof  of  actual  export,  —  of  the  sort  required  by  the 
government  before  granting  a  drawback  for  import  duties  paid,  — 
were  given  rebates  from  the  usual  domestic  prices. 

Two  sorts  of  questions  present  themselves:  (6n^,  whether  a 
country  gains  by  dumping  or  loses  by  being  dumped  on;  the 
other,  how  it  comes  about  that  dumping  takes  place  at  all. 
"On  the  first  question,  the  drift  of  protectionism  and  mercantil- 
ism is  naturally  in  favor  of  dumping.  It  is  in  accord  with  pro- 
tectionist reasoning  to  regard  exports  and  devices  for  increasing 
exports  with  favor.  Imports  are  thought  presumably  harmful  to 
a  country,  exports  presumably  beneficial.  The  Steel  Corpora- 
tion's representatives,  when  testifying  before  Congressional  com- 
mittees and  before  the  courts,  have  not  failed  to  parade  with 

1  The  following  are  the  figures  for  1904-13  of  the  exports  by  the  Steel  Products 
Co.  (i.  e.,  the  Steel  Corporation),  compared  with  the  total  exports  of  iron  and  steel. 

Iron  and  Steel  Manufactures 


Exports  by 

Exports  by 

Year 

Total  Exports 

Steel  Products  Co. 

Year 

Total  Exports 

Steel  Products  Co. 

(Fiscal  years) 

(Calendar  years) 

(Fiscal  years) 

(Calendar  years) 

1904 

$111.9  mill. 

$31.4  mill. 

1909 

$144.9  mill. 

$41.1  mill. 

1905 

134-7 

32-7 

1910 

179.1 

53-i 

1906 

161.0 

43-9 

1911 

230.7 

69S 

1907 

181.5 

47.2 

1912 

268.1 

92.0 

1908 

184.0 

33-3 

1913 

306.0 

See  the  figures  given  before  the  Stanley  Committee  (Report,  p.  2749),  and  those 
given  in  the  government  suit  against  the  Steel  Corporation  (Defendants'  Exhibit, 
ii,  p.  38).  The  two  sets  of  figures  agree,  except  for  1905,  for  which  I  have  taken 
the  second-named  source  of  information. 


204         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

pride  this  part  of  their  operations,  confident  that  they  would  be 
thought  herein  to  have  deserved  well  of  the  country.  The 
average  man  beyond  question  would  approve,  and  so  would  the 
average  writer  on  financial  and  economic  topics. 

It  is  part  of  the  same  general  attitude  that,  conversely,  dump- 
ing is  resisted  by  the  countries  into  which  the  articles  are  sent, 
at  least  when  there  are  in  those  countries  competing  industries. 
The  protectionist  approves  when  his  own  country  dumps,  but 
is  alarmed  and  indignant  when  the  foreigner  resorts  to  the  same 
practice.  Our  government  laid  a  countervailing  duty  on  sugar 
during  the  period  when  the  countries  of  continental  Europe  gave 
bounties  on  the  export  of  sugar.  Canada  embodied  an  anti- 
dumping clause  in  her  tariff  legislation  of  1904  and  1907.1  Our 
own  tariff  act  of  1909  contained  a  sweeping  section  levying  addi- 
tional duties  equal  to  any  and  every  export  allowance  or  bounty 
by  foreign  countries:  and  the  same  provision  was  made  in  the 
act  of  1913. 

On  the  principles  involved  in  this  first  question,  I  am  unable  to 
do  better  than  repeat  what  I  have  said  elsewhere : 2  — 

"  '  Dumping  '  I  take  to  mean  the  disposal  of  goods  in  foreign 
countries  at  less  than  normal  price.  It  can  take  place,  as  a  long- 
continued  state  of  things,  only  where  there  is  some  diversion  of 
industry  from  the  usual  conditions  of  competition.  It  may  be 
the  result  of  an  export  bounty,  enabling  goods  to  be  sold  in  for- 
eign countries  at  a  lower  price  than  at  home.  It  may  be  the 
result  of  a  monopoly  or  effective  combination,  which  is  trying 
to  keep  prices  within  a  country  above  the  competitive  point. 
Such  a  combination  may  find  that  its  whole  output  cannot  be 
disposed  of  at  these  prices,  and  may  sell  the  surplus  in  a  free 
market  at  anything  it  will  fetch,  —  always  provided  it  yields  the 
minimum  of  what  Professor  Marshall  happily  calls  '  prime  cost.' 

"  Now,  if  this  sort  of  thing  goes  on  indefinitely,  I  confess  that 
I  am  unable  to  see  why  it  can  be  thought  a  source  of  loss  to  the 
dumped  country;  unless,  indeed  we  throw  over  all  our  accepted 
reasoning  on  international  trade  and  take  the  crude  protectionist 

1  For  an  account  of  the  Canadian  legislation  see  a  paper  by  Professor  A.  Shortt, 
Quarterly  Journal  of  Economics,  vol.  xx,  p.  250. 

2  I  quote  again  from  the  paper  cited  at  p.  155,  above. 


1 


IMPORTS  AND  EXPORTS  —  DUMPING  20$ 

view  in  toto.  If  one  country  chooses  to  present  goods  to  another 
for  less  than  cost;  or  lets  its  industrial  organization  get  into  such 
condition  that  a  monopoly  can  levy  tribute  at  home,  and  is  then 
enabled  or  compelled  by  its  own  interests  to  present  foreign  con- 
sumers with  goods  for  less  than  cost,  —  why  should  the  second 
country  object  ?  Is  not  the  consequence  precisely  the  same,  so 
far  as  that  other  country  is  concerned,  as  if  the  cost  of  the  goods 
had  been  lowered  by  improvements  in  production  or  transporta- 
tion, or  by  any  method  whatever  ?  Unless  there  is  something 
harmful  per  se  in  cheap  supply  from  foreign  parts,  why  is  this 
kind  of  cheap  supply  to  be  condemned  ? 

^The  answer  to  this  question  seems  to  me  to  depend  on  the 
qualification  stated  above  -*-Jf  this  sort  of  thing  goes  on  indefi- 
nitely. Suppose  it  goes  on  for  a  considerable  time,  and  yet  is  sure 
to  cease  sooner  or  later.  There  would  then  be  a  displacement  of 
industry  in  the  dumped  country,  with  its  inevitable  difficulties  for 
labor  and  capital;  yet  later,  when  the  abnormal  conditions 
ceased,  a  return  of  labor  and  capital  to  their  former  occupations, 
again  with  all  the  difficulties  of  transition.  It  is  the  temporary 
character  of  dumping  that  gives  valid  ground  for  trying  to  check  it. 

"  A  striking  case  of  this  sort  has  always  seemed  to  me  to  be 
that  of  the  European  export  bounties  on  sugar  which  for  so  long 
a  period  caused  continental  sugar  to  be  dumped  in  Great  Britain. 
These  bounties  were  not  established  of  set  purpose.  They  grew 
unexpectedly,  in  the  leading  countries,  out  of  a  clumsy  system  of 
internal  taxation.  They  imposed  heavy  burdens  on  the  ex- 
chequer, as  well  as  on  the  domestic  consumer,  in  the  bounty- 
giving  countries;  and  they  were  upheld  by  a  senseless  spirit  of 
international  jealousy.  Repeated  attempts  to  get  rid  of  them 
by  international  conferences  show  that  the  cheap  supply  to  the 
British  consumer,  and  the  embarrassment  of  the  West  Indian 
planter  and  the  British  refiner,  rested  not  on  the  solid  basis  of 
permanently  improved  production,  but  on  the  uncertain  support 
of  troublesome  legislation.  It  might  well  be  argued  that  these 
conditions  would  come  to  an  end  sooner  or  later.  The  longer  the 
end  was  postponed,  the  worse  was  the  present  dislocation  of  in- 
dustry and  the  more  difficult  the  eventual  return  to  a  settled 


206         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

state  of  things.  No  doubt  these  were  not  the  only  considerations 
that  in  fact  led  Great  Britain,  the  one  great  dumping  ground,  to 
serve  notice  that  she  would  impose  import  duties  equal  to  the 
bounties,  unless  these  were  stopped.  Perhaps  this  decisive  step 
would  have  been  taken  even  if  it  had  appeared  that  the  bounties 
were  to  continue  as  a  permanent  factor  in  the  sugar  trade.  But 
it  is  in  their  probably  temporary  character  that  the  sober  econo- 
mist finds  justification  for  the  policy  that  led  to  their  abolition. 
At  all  events  there  is  tenable  ground  for  arguing  that  Great 
Britain,  in  causing  them  to  be  stamped  out,  acted  not  only  in 
the  interest  of  the  much-abused  consumers  of  sugar  on  the  Conti- 
nent, but  in  the  permanent  interests  of  her  own  industrial 
organization." 

These  principles  should  be  borne  in  mind,  and  at  the  same 
time  may  be  subject  to  qualification,  when  we  turn  from  the 
simplest  case,  —  that  of  dumping  in  consequence  of  export 
bounties  or  the  like,  —  to  the  more  complicated  case  where  goods 
are  sold  abroad  at  lower  prices  quite  without  public  subsidy. 
Here  it  is  not  so  easy  to  answer  our  second  question,  —  how  does 
it  happen  that  sales  are  made  to  foreign  purchasers  at  lower 
prices  than  to  domestic  ?     How  explain  the  phenomenon  ? 

The  precise  phenomenon  now  under  consideration,  it  must  be 
remembered,  is  the  disposal  of  part  of  a  supply  at  a  lower  price 
than  is  got  for  the  bulk  of  it.  It  is  quite  different  from  another 
phenomenon,  common  enough,  and  often  called  "  dumping,"  — 
throwing  the  whole  of  a  supply  on  the  market  and  disposing  of  it 
for  whatever  it  will  fetch.  It  is  the  discrimination  in  price  which 
calls  for  explanation,  and  especially  the  discrimination  in  favor  of 
foreigners.  This  again  seems  to  be  of  two  kinds :  sporadic  and 
irregular,  or  continuous  and  deliberate.  The  explanation  would 
seem  to  be  different  according  as  it  is  of  the  one  kind  or  the  other. 

Sporadic  dumping  commonly  takes  place  by  the  disposal  of 
part  of  a  supply  in  some  out-of-the-way  market,  while  yet  the 
accustomed  price  is  maintained  in  the  usual  markets.  It  is  part 
of  the  halting  process  by  which  the  equilibrium  of  demand  and 
supply  is  brought  about;  one  of  many  instances  to  show  that  the 
results  which  the  economist  thinks  probable  or  certain  come  to 


IMPORTS  AND  EXPORTS  —  DUMPING  207 

pass  not  smoothly  or  promptly  but  by  slow  and  irregular  steps. 
"  Fair  prices  "  and  "  square  dealing  "  play  a  larger  part  in  every- 
day transactions  than  is  apt  to  be  admitted  by  the  economist, 
skeptical  as  he  is  about  the  pseudo-morals  of  trade.  A  manu- 
facturer thinks  it  "  fair  "  to  treat  his  regular  customers  with 
equality,  and  not  to  sell  to  one  at  lower  rates  than  to  another; 
and  conversely  the  customers  expect  him  to  treat  them  "  right." 
Moreover,  the  prices  of  many  goods,  more  particularly  of  special- 
ties and  articles  having  a  brand  or  trade-mark,  are  much  influ- 
enced by  tradition  and  custom.  The  producer  of  such  an  article 
strives  with  all  his  might  to  maintain  the  traditional  price,  even 
though  it  proves  difficult  to  sell  the  whole  of  his  output  at  that 
price.  Hence  when  there  is  a  hitch  in  disposing  of  the  entire 
current  supply,  he  will  welcome  a  chance  to  "  dump  "  in  some 
unfamiliar  market.  The  temptation  to  do  so  comes  the  more 
frequently  and  pressingly  under  the  conditions,  usual  in  modern 
industry,  of  large  plant  and  heavy  overhead  charges.  If  the 
prime  cost  ("  direct  "  or  "  productive  "  expense)  is  got  back  at 
these  low-price  sales,  and  if  total  cost  or  "  fair  price  "  can  be 
maintained  in  the  usual  sales,  there  is  a  net  gain  from  this  sort 
of  dumping.  It  may  take  place  within  a  country  as  well  as 
through  the  export  trade;  but  it  seems  to  be  more  likely  in  the 
latter.  Where  indeed  exports  take  place  regularly  and  on  a 
considerable  scale,  there  is  no  greater  probability  of  special  con- 
cessions to  the  foreigners  than  to  out-of-the-way  domestic  pur- 
chasers. But  where  the  export  is  occasional  and  irregular,  it 
affords  a  tempting  opportunity  for  sporadic  dumping.  The  mar- 
ket at  home  —  the  main  one  —  is  not  "  spoiled."  All  this  will 
not  prevent  an  eventual  collapse  of  the  traditional  domestic 
prices,  if  the  supply  is  steadily  larger  than  can  be  sold  at  those 
prices;  but  it  staves  off  the  collapse,  and  if  the  condition  of  over- 
supply  is  but  temporary,  may  serve  to  tide  over  a  period  of  de- 
pression without  "  breaking  "  the  market.  Shrewd  business 
men  have  questioned  whether  it  is  good  policy; 1  but  there  seems 

1  Thus  a  member  of  Lister  &  Co.,  a  great  British  silk  manufacturing  firm, 
admitted  occasional  sales  for  export  at  lower  than  home  prices,  but  said  "  this 
class  of  business  has  many  objectionable  sides,"  "  causes  irregular  work,"  tends 


208         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

to  be  a  strong  recurrent  temptation  to  relieve  the  general  market 
in  this  way. 

Continuous  and  steady  dumping  is  a  different  matter.  And 
it  does  take  place.  Sales  at  lower  prices  are  made  to  foreigners, 
not  only  sporadically,  but  for  long  periods  and  systematically. 
This  phenomenon  would  seem  to  be  explicable  only  on  another 
ground,  — ■  that  of  monopoly.  Where  there  are  competing  pro- 
ducers, no  one  of  them  will  steadily  accept  lower  prices  than  the 
others.  Each  will  be  desirous  of  selling  in  the  most  advantageous 
market.  There  will  be  dumping  of  the  sporadic  sort  only,  by 
one  of  the  competitors  or  by  several  of  them,  at  times  when  the 
total  output  is  not  easily  carried  off  at  remunerative  prices.  The 
more  effective  is  competition,  the  more  standardized  the  article, 
the  less  likely  is  even  sporadic  dumping.  On  the  other  hand,  the 
more  removed  the  conditions  are  from  those  of  smooth-working 
competition,  —  to  the  degree  that  there  is  influence  from  brands, 
specialties,  quasi-monopoly,  complete  monopoly,  —  the  more 
is  there  likely  to  be  departure  from  a  uniform  market  price, 
and  the  more  likely  is  it  that  discrimination  and  dumping  will 
appear. 

Dumping  due  to  monopoly  is  simply  one  form  of  the  dis- 
criminations in  price  which  appear  under  monopoly  conditions, 
and  which  are  familiar  to  economic  students.1  The  monopolist 
sells  at  high  prices  where  he  can,  and  accepts  lower  prices  where 
he  must.  If  there  are  protective  duties  or  other  factors  within 
the  country  (such  as  advantages  of  location)  which  prevent 
competition  from  foreigners,  a  higher  price  may  be  got  by  the 
monopolist  at  home  than  is  secured  in  the  foreign  market  where 
competition  operates  without  restriction. 

Such  would  seem  to  be  the  explanation  of  a  large  part  of  the 
export  business  of  the  Steel  Corporation.     Much  of  that  business 

to  spoil  reputation  because  quality  and  costs  are  cut  keenly,  and  so  on.  See  Report 
of  the  (Chamberlain)  Tariff  Commission,  ii,  Part  6,  paragraph  3326.  Similarly, 
the  President  of  the  U.  S.  Steel  Corporation  spoke  of  this  sort  of  dumping  as  a 
"  sporadic  business,"  "  an  uneconomic  practice,  and  one  that  does  not  develop 
continuous  business."  {Testimony  of  the  Government  suit  against  the  Steel  Corpora- 
tion, 19 13,  x,  p.  3843.) 

1  See,  e.  g.,  Taussig,  Principles  of  Economics,  ch.  15,  §§  4,  5. 


IMPORTS  AND  EXPORTS  —  DUMPING  209 

is  secured  by  systematic  dumping.  Though  part  of  the  Corpora- 
tion's export  is  similar  to  that  of  the  strictly  competitive  iron  and 
steel  articles,  a  substantial  part  is  to  be  explained  on  the  ground 
of  monopoly.  The  monopoly  is  not  an  iron-clad  one,  nor  is  the 
price  secured  in  the  domestic  market  such  as  would  appear  under 
full  monopoly.  It  is  a  quasi-monopoly  price,  not  a  strict  monop- 
oly price.  But  that  price  has  been  a  profitable  one,  somewhat 
higher  than  could  have  been  maintained  under  really  effective 
competition.  Much  the  same  seems  to  be  the  situation  in 
Germany,  under  the  Stahlwerksverband.  There,  too,  combina- 
tion has  kept  the  prices  of  many  iron  and  steel  products  above  the 
competitive  range;  though  the  combination  has  taken  the  form 
of  the  Kartell,  —  the  strictly-enforced  agreement  of  quasi-inde- 
pendent producers,  —  not  that  of  the  domination  of  the  market 
by  one  great  consolidated  concern.  There,  too,  export  prices 
have  been  steadily  lower  than  domestic  prices.  And  in  both 
countries  the  discrimination  is  approved  by  the  protectionists: 
high  prices  within  the  country,  and  large  exports  stimulated  by 
lower  prices  without,  are  alike  welcome  under  their  philosophy. 

It  is  often  maintained  that  lower  prices  to  foreigners  are  in  no 
way  disadvantageous  to  the  domestic  consumers;  they  enable 
the  business  to  be  carried  on  continuously,  keep  the  working 
force  intact  and  employed,  lessen  the  overhead  charges  per  unit, 
and  so  on.  The  reasoning  is  specious,  but  not  tenable.  All  these 
same  desirable  results  would  be  attained  if  the  reductions  in  price 
were  made  to  favored  domestic  purchasers,  not  merely  to  for- 
eigners. Yet  if  made  to  a  special  knot  of  domestic  purchasers, 
the  question  would  at  once  be  asked,  why  not  equally  to  all  ? 
Why  not  lower  the  price  for  everybody,  to  the  extent  needed  in 
order  to  dispose  of  the  whole  output  ?  Then  there  would  also 
be  continuous  operation,  steady  employment  of  workmen,  reduc- 
tion of  overhead  charges,  and  so  on.  Lurking  under  the  advocacy 
of  this  sort  of  dumping,  there  is  almost  always  an  express  or 
implied  premise  of  a  mercantilist  character,  —  that  international 
trade  is  a  thing  quite  by  itself,  and  that  exports  cause  an  advan- 
tage of  a  special  sort,  not  to  be  secured  by  any  commonplace 
sales  within  the  country. 


2IO         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

The  argument  that  monopoly  conditions  explain  the  case  may 
be  put  in  another  way.  The  domestic  price  (higher  than  the 
export  price)  may  or  may  not  be  a  "  fair  "  or  normal  price,  that 
is,  such  a  price  as  would  bring  the  usual  rate  of  profit,  and  would 
be  maintained  under  competitive  conditions.  If  it  is  a  fair 
price,  then  the  foreign  price  being  lower,  is  less  than  fair.  In 
the  long  run,  the  business  as  a  whole  then  would  prove  a  losing 
one;  the  domestic  business  just  pays,  the  foreign  business  does 
not  pay.  Then  surely  the  low  foreign  price  would  not  be  in- 
definitely maintained;  such  dumping  could  not  go  on.  Or  the 
foreign  price  may  be  not  less  than  "  fair,"  but  quite  a  sufficient 
one,  —  enough  to  bring  the  normal  profit,  overhead  charges  and 
all  being  reckoned  in.  In  this  case  only  will  the  dumping  be 
steady  and  continuous.  But  in  this  case  the  domestic  price, 
being  higher,  is  necessarily  more  than  fair  ";  and  the  per- 
manent maintenance  of  a  domestic  price  higher  than  normal 
indicates  that  competition  is  not  free,  —  that  there  is  some 
approach  to  monopoly  conditions. 

In  all  such  discussion,  we  are  confronted  with  the  question, 
is  there  a  "  fair  "  profit  or  a  "  normal  "  price  ?  Is  the  notion 
applicable  to  such  industries  as  the  iron  and  steel  manufacture 
of  our  day  ?  Is  there  a  representative  firm  or  a  representative 
outfit  whose  expenses  of  production  can  be  said  to  be  normal  ? 
How  much  allowance  must  be  made,  in  an  unbiased  and  careful 
process  of  cost  measurement  (say  in  an  inquiry  conducted  by  a 
government  bureau)  for  depreciation,  risk,  obsolescence,  the 
reward  of  capable  management  ?  The  striking  thing  is  that 
those  engaged  in  the  industries  speak  without  hesitation  about 
ascertainable  cost  and  reasonable  price.  They  aver,  for  example, 
that  the  price  of  twenty-eight  dollars  a  ton  so  long  maintained 
for  steel  rails  was  no  more  and  no  less  than  a  fair  price.  The 
truth  seems  to  be  that  they  have  in  mind  very  much  what  the 
economist  has  in  mind;  not  something  which  is  ascertainable 
with  strict  accuracy,  —  even  the  most  refined  system  of  cost 
accounting  gives  at  best  a  basis  for  inferences,  —  but  a  rough 
approximation.  The  cost  figure  is  of  service,  so  far  as  concerns 
matters  of  public  policy,  mainly  in  checking  marked  deviations 


IMPORTS  AND  EXPORTS —  DUMPING  211 

from  a  reasonable  price.  With  reference  to  steel  rails,  for 
example,  the  manufacturer  who  maintained  that  under  the 
conditions  of  the  period  1900-1910,  $28  was  a  fair  price,  would 
doubtless  admit  that  $27  or  $29  might  with  equal  plausibility  be 
considered  fair.  Who  could  say  in  advance  how  things  would 
turn  out  in  the  long  run  ?  How  much  would  have  to  be  allowed 
for  depreciation,  running  at  half-time,  contingencies  of  all  sorts  ? 
What  is  the  normal  or  reasonable  rate  of  return  in  a  manufactur- 
ing industry  of  this  kind  ?  A  public  body  (say  a  Trade  Commis- 
sion) charged  with  ascertaining  and  fixing  a  fair  price  could  not 
possibly  do  more  than  settle  an  approximate  standard.  Our 
manufacturer  would  probably  admit  at  once  that  $35  would  be 
clearly  more  than  fair,  and  $20  clearly  less  than  fair;  and  as  to  the 
figure  of  $28,  would  merely  say  that  it  was  "  about  right." 

The  steel  rail  situation,  as  it  happens,  illustrates  in  more  ways 
than  one  the  various  possible  phases  of  dumping  and  its  con- 
comitants; not  only  the  connection  between  dumping  and  monop- 
oly, and  the  difficulty  of  gauging  the  "  fair  "  price,  but  the  shifts 
in  industrial  conditions  which  necessarily  affect  the  approximated 
reasonable  price.  That  domestic  price  of  $28  a  ton,  long  main- 
tained and  unvarying:  was  it  "  fair  "  ?  If  so,  the  foreign  price 
was  less  than  fair;  and  then  rail  making  as  a  whole  was  conducted 
at  a  loss.  If  the  foreign  price  (less  than  $28)  was  itself  fair,  then 
the  domestic  price  was  more  than  fair,  and  rail  making  as  a 
whole  was  more  than  sufficiently  remunerative.  For  a  large 
part  of  the  period  during  which  the  fixed  price  was  kept  up,  the 
latter  probably  was  the  case;  the  industry,  though  not  exorbi- 
tantly profitable,  yielded  more  than  a  normal  or  competitive 
return.  As  the  years  went  on,  however,  the  situation  shifted. 
With  the  general  advance  in  prices,  expenses  of  production  rose, 
and  profit  became  less.  The  consequent  gradual  shaving  of  the 
margin  of  gain  appears  to  have  proceeded  so  far  by  the  close  of 
the  decade  (about  19 10)  that  the  $28  price  was  but  little  more 
than  fair,  and  the  foreign  perhaps  something  less  than  fair.  The 
business  as  a  whole  was  very  likely  stripped  of  any  marked 
monopoly  profits;  the  two  sets  of  prices  averaged  "  about  right," 
and  were  maintained  at  their  divergent  rates  largely  through 


212        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

inertia.  The  process  by  which  this  outcome  was  reached  was 
insidious,  and  alike  unexpected  and  unwelcome  to  the  rail 
makers.  Yet  the  established  policy  of  a  fixed  domestic  price, 
the  fear  of  public  discussion  about  a  rise  in  price,  the  higgling  of 
the  market  as  regards  foreign  prices,  a  disposition  to  go  slow  and 
await  a  possible  turn  in  the  tide  of  rising  expenses,  —  these  might 
explain  an  acquiescence  through  a  considerable  period  in  a  situa- 
tion quite  at  variance  with  what  had  been  expected  from  the 
dumping  policy. 

It  must  not  be  supposed  that  all  of  the  export  business  done 
by  the  Steel  Corporation  was  or  is  at  reduced  prices,  or  is 
explicable  solely  on  the  grounds  just  stated.  Many  of  the  articles 
are  sold  abroad  because  they  are  cheap  at  home  also.  This 
seems  to  be  the  case  with  wire  and  especially  wire  fencing,  in 
which  American  ingenuity  and  adaptiveness  play  the  same  part 
as  in  tools  and  machines.  So  it  seems  to  be,  in  part  at  least, 
with  structural  steel  and  bridge-work.  Structural  steel  for  build- 
ings, for  example,  is  not  supplied  by  the  Steel  Corporation  at 
lower  price  than  those  quoted  by  its  competitors  in  foreign  coun- 
tries; but  it  is  lighter  and  better  designed,  and  preferred  even 
at  the  same  or  a  higher  price.1  A  considerable  part  is  played  by 
skill  and  persistence  in  merchandizing,  —  by  steady  and  well- 
planned  cultivation  of  the  foreign  market.  Not  a  little  is  due 
to  the  economies  from  a  great  and  varied  business.  In  many 
foreign  places  it  is  worth  while  to  maintain  agencies  and  to  make 
considerable  shipments  only  where  a  variety  in  products  enables 
considerable  sales  to  be  rolled  up.  Here  are  the  advantages  of 
large-scale  production;  advantages,  to  be  sure,  which  can  be 
secured  not  merely  by  size,  but  by  skilful  management.  It  is 
not  to  be  denied  that  ability  in  management  has  played  a  large 

1  The  Steel  Corporation  built  the  first  steel  structure  in  Buenos  Ayres  in  1905, 
and  from  that  date  until  1913  built  every  steel  structure  in  the  city.  The  European 
steel  makers  offered  lower  prices  per  ton,  but  "  we  were  endeavoring  to  get  a  higher 
ton  price  by  giving  a  lighter  structure  that  will  answer  for  a  greater  amount  of 
work."  (President  Farrell  of  the  Steel  Corporation,  testifying  in  the  Government 
Suit  against  the  Corporation,  Evidence,  x,  p.  3795.)  This  is  the  sort  of  steel  work 
which  has  been  most  skilfully  developed  by  American  engineers  and  steel  makers; 
in  other  words,  in  which  they  manifest  a  comparative  advantage. 


IMPORTS  AND  EXPORTS  —  DUMPING  213 

part  in  the  development  of  this  part  of  the  Steel  Corporation's 
business.     Here,  as  elsewhere,  leadership  and  organization  have 
been  important  factors  in  bringing  about  the  conditions  of  com- 
"  parative  advantage.1 

To  conclude:  The  extraordinary  growth  of  iron  and  steel 
exports  since  the  beginning  of  the  twentieth  century  seems  expli- 
cable in  the  main  on  the  ground  of  comparative  advantage.  No 
doubt,  in  some  branches  of  trade  it  has  been  promoted  by  dump- 
ing. But  most  of  the  exports  rest  on  a  more  solid  basis,  —  effec- 
tiveness of  labor,  cheapness  or  high  quality  of  the  product.  That 
effectiveness  of  labor,  again,  rests  only  in  part  on  the  rich  natural 
resources  of  coal  and  iron.  The  most  important  factors  are  the 
qualities  of  the  industrial  leaders:  mechanical  ingenuity,  skill  in 
organization  and  management,  the  utmost  utilization  of  the 
advantages  of  large-scale  production. 

1  See  the  interesting  account  of  the  growth  of  the  Steel  Corporation's  export 
business  given  by  Mr.  Farrell,  in  his  testimony  (just  cited)  in  the  Government  Suit, 
pp.  3783  seq.  Cf .  his  testimony  before  the  Stanley  Committee,  Report,  pp.  3748  seq. 
Mr.  Farrell  had  been  organizer  and  president  of  the  Steel  Products  Co.  (the  export 
subsidiary),  before  being  made  president  of  the  Steel  Corporation  itself. 

Among  the  documents  introduced  by  the  Steel  Corporation  in  the  Government 
Suit  (Defendant's  Exhibits,  ii,  no.  41)  is  a  tabular  statement  showing  for  a  large  list 
of  articles  whether  export  prices  were  more  or  less  than  the  domestic.  For  a  con- 
siderable number  the  export  prices  were  not  less,  but  more,  —  there  was  no  dumping; 
such  were  finished  structural  work,  spring  steel,  steel  piling,  axles.  As  a  rule  export 
prices  were  lower.  The  figures,  however,  are  to  be  used  with  caution,  since  they 
state  merely  prices  realized  f.  o.  b.  at  the  works,  and  give  no  indication  whether 
expenses  of  transportation  to  destination  were  borne  by  the  Steel  Corporation 
(directly  or  indirectly)  or  by  the  purchasers. 


PART  IV 
TEXTILES 


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CHAPTER  XTV 
THE  GROWTH  OF  THE  AMERICAN  SILK  MANUFACTURE 

The  silk  manufacture  is  in  a  special  sense  the  child  of  protection. 
Hazardous  though  it  always  is  to  undertake  to  say  what  would 
have  happened  if  the  conditions  had  been  different,  one  may  ven- 
ture in  this  case  to  assert  that  if  high  duties  had  not  been  imposed 
during  the  civil  war  there  would  have  been  no  considerable  silk 
industry  in  the  United  States.  The  situation  is  different  with 
the  other  textile  manufactures.  Cotton  and  woolen  fabrics  were 
made  on  a  large  scale  under  the  moderate  duties  that  prevailed 
for  many  years  before  the  war;  the  regime  of  high  duties  dur- 
ing the  last  half-century  has  simply  served  to  increase  the  volume 
and  extend  the  range  of  industries  already  established.  But  the 
very  existence  of  the  silk  manufacture  is  due  to  protection.  To 
this  general  statement,  it  is  true,  there  are  some  minor  exceptions. 
Certain  branches  of  the  industry  did  develop  before  the  war,  — 
constituting  exceptions  which,  as  will  appear  presently,  are  in- 
structive. But  those  parts  of  the  industry  which  have  come  to 
be  by  far  the  most  important,  owe  their  rise  to  the  tariff. 

For  other  reasons  than  its  origin  under  the  influence  of  protec- 
tion the  history  of  the  silk  manufacture  is  significant.  The  in- 
dustry not  only  was  quite  new  in  the  United  States,  but  soon 
developed  along  lines  of  its  own.  So  great  has  been  the  trans- 
formation in  some  branches  as  to  suggest  at  least  the  possibility 
of  successful  application  of  protection  to  young  industries.  Yet 
a  parallel  development  on  the  Continent  of  Europe  indicates  that 
forces  not  peculiar  to  the  United  States,  but  of  international 
scope,  have  been  at  work.  Something  like  a  belated  industrial 
revolution  took  place  in  the  industry,  greatly  altering  the  rela- 
tions of  the  different  producing  countries.  Further,  the  character 
and  sources  of  supply  for  the  raw  material  are  unusual.  And, 
finally,  less  attention  has  been  given  in  our  controversies  to  this 
industry  than  to  others  stimulated  by  protection.      In  many 

ways  the  case  invites  study. 

217 


21 8         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

During  the  civil  war,  the  duty  on  manufactures  of  silk,  which 
had  before  been  moderate  (25  per  cent  under  the  act  of  1846, 
19  per  cent  under  that  of  1857)  was  raised,  and  toward  the  close 
of  the  war,  in  1864,  was  fixed  at  60  per  cent.  The  increase  was 
solely  for  revenue,  with  no  trace  of  that  admixture  of  protection- 
ism which  was  a  factor  in  so  much  of  the  tariff  legislation  of  the 
period.  The  60  per  cent  rate  remained  in  effect  until  1883.  In 
the  general  revision  of  that  year,  one  of  50  per  cent  was  substi- 
tuted. The  simple  method  of  imposing  a  general  ad  valorem 
duty  was  retained  (with  a  minor  exception,  presently  to  be 
noted)  until  1897. 

It  is  not  to  be  doubted  that  undervaluation,  largely  fraudulent, 
was  prevalent  throughout  this  period,  and  that  it  caused  the 
effective  duty  and  the  rate  of  protection  to  be  less  high  than  the 
figure  on  the  statute  book  would  indicate.  As  the  domestic 
industry  developed,  those  interested  in  it  protested  more  and 
more  strongly  against  this  state  of  things  and  urged  the  adoption 
of  specific  duties.  The  extraordinary  variety  of  silk  fabrics,  and 
the  difficulty  of  grading  them  by  external  marks  or  physical 
qualities,  were  long  thought  to  raise  insuperable  obstacles  in  the 
way  of  specific  duties.  Yet  in  1897  specific  rates  were  devised 
and  applied;  anticipated  already  in  1890  by  rates  of  this  kind 
on  one  special  class  of  silks,  —  velvets  and  other  pile  fabrics. 
The  elaborate  system  of  specific  duties  applied  in  1897,  though 
advocated  chiefly  on  the  ground  of  checking  fraudulent  under- 
valuation, in  fact  served  also  the  purpose  of  raising  the  duties  on 
many  goods,  and  even  of  making  them  quite  prohibitory  on  the 
cheaper  grades.  A  dragnet  or  stoppage  clause  was  retained  by 
which  in  any  case  silks  were  to  be  dutiable  at  a  rate  at  least 
as  high  as  50  per  cent;  and  the  more  expensive  grades  of  silks, 
on  which  the  specific  duties  might  have  been  relatively  low  (such 
is  always  the  tendency  under  specific  duties),  continued  to  be 
assessed  for  duty  under  this  clause.  No  change  in  the  system 
was  made  by  the  tariff  act  of  1909;  the  rates  of  1897  were  re- 
tained; the  only  change  of  some  moment  was  that  the  dragnet 
or  minimum  rate  became  45  per  cent,  not  50  per  cent. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      219 

The  revision  of  19 13  brought  less  incisive  changes  in  the  silk 
schedule  than  in  almost  any  other  part  of  the  protective  system. 
It  is  true  that  the  specific  duties  were  entirely  swept  away. 
None  but  ad  valorem  duties  remained.  But  these  ad  valorem 
duties  were  left  comparatively  high,  —  45  per  cent  on  most 
fabrics,  50  per  cent  on  velvets  and  plushes.  These  were  almost 
the  identical  rates  previouslyin  force  on  the  more  expensive  goods. 
On  the  cheaper  goods,  the  reduction  seemed  considerable,  yet  in 
fact  signified  little.  As  will  appear  in  the  course  of  the  discussion, 
the  previous  specific  duties  had  been  extreme,  —  above  the  point 
of  prohibition.  The  change  to  the  ad  valorem  rate  left  the  tariff 
so  high,  even  after  allowance  for  probable  undervaluation,  as 
still  to  keep  out  all  imports  of  the  ordinary  grades  of  silks. 

Summing  up,  we  may  say  that  the  silk  manufacture  during  the 
half-century  that  followed  the  civil  war  was  sheltered  by  a  high 
barrier  on  imports.  In  this  case,  as  in  others,  duties  originally 
imposed  for  emergency  revenue  purposes  became  protectionist  in 
their  effect,  and  then,  with  the  accentuation  and  systematization 
of  the  protective  system,  were  made  more  rigorous.  Even  the 
supposedly  radical  revision  of  19 13  left  them  little  abated. 

The  growth  of  the  silk  industry  under  this  long-maintained 
regime  of  high  protection  was  not  less  extraordinary  than  that  of 
the  iron  industry.  It  doubled  in  volume  almost  every  decade. 
The  appended  tabular  statement  summarizes  the  story.1  The 
gross  value  of  the  domestic  silk  manufactures  increased  from  an 
insignificant  amount  (and  almost  all  of  that  attributable  to  a 

1  Silks  (millions  of  dollars) 


Census  of 

Gross  Value 
of  Product 

Value  of  Product 
(Deducting  Inter- 
mediate Products 
Counted  Twice) 

"  Value  Added  by 

Manufacture  " 

(Deducting  Cost 

of  Material) 

Imports 

1850 

1.8* 

.... 

.  • . 

17-7 

i860- 

6.6* 

.... 

33° 

1870 

12.2 

.... 

4.4 

24.2 

1880- 

41.0 

18.6 

31-3 

1800 

87-3 

69.2 

36.3 

37-4 

1900 

107.2 

924 

44.8 

26.8 

1905- 

133-3 

118. S 

S7-4 

28.7 

IQIO 

196.9 

172.2 

89.1 

33-1 

*  Chiefly  sewing  silk,  fringes,  etc.;  see  Census  Report  of  i860  on  Manufactures,  pp.  94-103. 

The  figures  of  product  are  taken  from  the  Census  Reports,  and  refer  in  each  case 
to  the  year  preceding;  thus,  the  census  enumeration  of  1910  gives  the  facts  for  the 


220         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

single  specialty)  in  i860,  to  nearly  200  millions  of  dollars  worth 
in  1 9 10.  It  is  true  that  these  large  figures  (given  in  the  first 
column)  need  correction.  The  methods  of  the  industry  have 
undergone  a  change  similar  to  that  in  other  textile  industries,  in 
the  direction  of  specialization.  Separate  establishments  now 
carry  on  some  processes  (e.  g.,  spinning  or  "  throwing  ")  which 
formerly  were  combined  with  other  processes  (e.  g.,  weaving)  in 
one  and  the  same  establishment.  Where  yarn  is  made  in  one 
mill,  and  reckoned  as  its  product,  and  then  is  used  in  another 
mill  which  reckons  the  whole  value  of  the  woven  fabric  as  its 
product,  the  same  "  product  "  is  counted  twice;  and  where  a 
change  in  the  direction  of  specialization  takes  place  between 
census  periods,  there  is  obviously  an  exaggeration  of  the  total 
output  in  the  later  period,  and  a  deceptive  appearance  of  rapid 
growth.  Allowance  for  this  sort  of  exaggeration  is  made  in  the 
second  column  of  the  table,  in  which  the  corrected  product  is 
stated;  the  census  authorities  having  excluded  what  was  counted 
twice  in  the  later  periods.  Even  so,  the  figures  show  a  growth 
from  nearly  nothing  to  172  millions  by  1910.  Quite  a  different 
qualification  is  made  in  the  third  column,  where  allowance  is 
made  also  for  the  raw  material  used  (chiefly  the  imported  raw 
silk).  The  value  of  the  expensive  raw  material  accounts  for 
about  half  the  value  of  the  finished  silks;  what  may  be  called 
the  separate  product  of  American  labor  and  capital  is  indicated 
by  the  third  series. 

In  striking  contrast  with  the  rapid  and  unceasing  increase  of 
the  domestic  product  is  the  virtually  stationary  volume  of  the 
imports.  The  figure  of  imports  for  19 10  is  precisely  the  same 
(33  millions)  as  that  for  i860,  half  a  century  before.  In  the 
intervening  years  the  imports  sometimes  were  considerably  larger 
than  this,  sometimes  considerably  smaller;  they  increased  in 
times  of  activity,  diminished  in  times  of  depression.      For  the 

industry  as  it  stood  in  1909.      The  imports  are  given  for  the  fiscal  years  ending  in 
the  census  year;   thus,  the  figure  for  1910  is  that  of  the  fiscal  year  1909-10. 

The  census  figures  for  the  earlier  years  can  make  no  pretensions  to  statistical 
exactness.  Beginning  with  1890  they  can  be  used  with  reasonable  confidence  in 
their  accuracy.  They  are  taken  from  the  Census  Bulletin  of  1910,  Statistics  of 
Silk  Manufacture. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      221 

fifty  years  as  a  whole,  they  show  no  tendency  to  rise  or  fall, 
fluctuating  above  or  below  the  same  general  level.  The  constitu- 
ent elements  in  the  imports  have  indeed  changed  very  much,  as 
will  appear  presently;  but  their  volume  has  been  virtually 
constant. 

It  follows  that  the  imports  have  formed  a  steadily  decreasing 
proportion  in  the  total  of  silks  used  in  the  country.  The  domestic 
product  has  formed  a  larger  and  larger  proportion  of  the  whole. 
Comparison  of  the  domestic  and  foreign  quotas  is  not  so  simple 
as  might  appear.  The  figures  to  be  considered  are  those  in 
columns  2  and  4;  since  the  imports,  as  well  as  the  domestic 
product,  are  reckoned  in  these  two  on  the  same  plan.  But  the 
imports,  when  they  reach  the  purchaser,  are  weighted  with  the 
duties;  and  in  reckoning  the  share  of  imports  and  domestic 
products  in  the  country's  consumption  of  silk  goods,  the  stated 
imports  must  be  swelled  by  the  duties.  Allowance  must  also  be 
made  for  the  fact  that  the  imports  have  been  much  undervalued 
at  the  custom  house;  the  stated  value  of  the  imports  formed  the 
basis  for  the  imposition  of  ad  valorem  duties,  but  sales  to  pur- 
chasers were  often  on  a  different  and  higher  basis.  For  the  pur- 
poses of  a  rough  comparison  (quite  sufficient  for  the  present 
purpose)  it  will  serve  to  add  60  per  cent  to  the  stated  imports. 
So  enlarged,  the  imports  will  be  found  to  be  more  than  triple  the 
domestic  product  in  1870,  about  one  and  a  half  times  that  prod- 
uct in  1880,  actually  less  in  amount  for  the  first  time  in  1890, 
and  then  a  smaller  and  smaller  proportion,  until  by  1910  they 
are  but  30  per  cent.1  In  i860  almost  all  the  silk  goods  used  in 
the  country,  and  quite  all  of  the  woven  fabrics,  were  imported; 
whereas  during  the  last  twenty  years  over  two-thirds  of  the  silk 
goods  of  all  kinds  have  been  supplied  by  the  domestic  manufac- 
turers. 

So  much  by  way  of  general  survey.  We  may  proceed  now  to 
a  more  detailed  consideration  of  the  different  branches  of  the 
industry. 

1  The  comparison  would  stand  thus;  the  first  column  giving  the  "  net  "  domestic 
product,  with  deduction  for  duplication  due  to  increased  specialization,  *.  e., 
column  2  of  the  previous  table;    the  second  .column  giving  the  imports  supple- 


222         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

Raw  silk  has  always  been  admitted  free.  In  this  respect  the 
silk  manufacture  developed  under  conditions  essentially  different 
from  those  of  the  wool  manufacture.  The  application  of  the 
protective  policy  to  wool  brought  in  the  latter  case  a  complica- 
tion from  which  the  silk  industry  was  exempt. 

This  freedom  as  regards  the  raw  material  was  not  always  un- 
contested. From  sundry  quarters,  at  various  times,  there  were 
suggestions  for  a  duty  on  raw  silk.  Both  material  and  finished 
product  have  long  had  a  certain  fascination:  both  have  been 
regarded  by  protectionists  as  peculiarly  enriching,  and  the  acqui- 
sition of  the  industries  as  peculiarly  desirable.  For  the  earlier 
period  (before  the  industrial  revolution  of  the  eighteenth  century) 
this  attitude  no  doubt  was  explicable  on  the  ground  that  the  high 
value  of  silk  fabrics  for  small  bulk  brought  them  readily  within 
the  range  of  international  dealings,  and  so  made  it  feasible  to 
apply  to  them  the  mercantilist  policy.    Yet  for  the  earlier  periods, 

mented  by  60  per  cent,  i.  e.,  the  figures  in  column  4  of  the  preceding  table,  with 
60  per  cent  added. 

Year 

1870 
1880 
i8go 
1  goo 
1005 
1910 

This  comparison,  needless  to  say,  can  make  not  the  slightest  pretence  to  statisti- 
cal accuracy;  but  it  shows  the  general  trend,  and  is  more  accurate  than  would  be 
one  based  on  the  bare  Treasury  figure  for  imports. 

How  far  the  imports,  when  compared  with  the  domestic  product,  should  be  en- 
larged by  adding  the  duties,  raises  some  nice  questions.  Evidently  they  should 
be  thus  weighted  if  we  wish  to  compare  what  is  paid  by  consumers  for  the  domestic 
supply  with  what  is  paid  by  consumers  for  the  imports.  It  is  not  so  clear  that  the 
same  correction  should  be  made  if  we  wish  merely  to  compare  the  quantities 
supplied.  If  the  prices  of  domestic  goods  are  raised  to  the  same  extent  as  those  of  im- 
ported goods,  —  by  the  full  amount  of  the  duties,  —  the  correction  must  be  applied 
in  the  same  way  and  to  the  same  extent  as  in  comparing  consumers'  payments.  If 
the  prices  of  domestic  goods  are  quite  unaffected  by  the  duties,  then  no  weighting 
or  correction  at  all  would  seem  to  be  called  for.  Neither  extreme,  —  complete 
effect  of  the  duties  in  raising  price  of  the  entire  domestic  output,  or  complete 
absence  of  any  effect  at  all,  —  is  likely  to  appear  in  fact.  Hence  a  comparison  of 
the  quantitative  relation  of  the  imported  and  domestic  quotas  can  rarely  be  deduced 
from  the  statistics  of  the  money  value  of  the  two. 


Domestic  Product 
Millions 

Imports 
Millions 

Per  cent  of 

Imports  to 

Domestic  Product 

$10.00 

$38.7 

387% 

34-5o 

50.1 

145 

69.10 

59-0 

86 

92.40 

42.9 

46 

118.50 

45-2 

38 

171.60 

53-o 

3° 

GROWTH  OF  AMERICAN  SILK  MANUFACTURE      223 

and  also  for  the  later  stage  which  set  in  with  the  industrial 
revolution,  the  predilection  for  a  silk  industry  has  probably  been 
intensified  by  the  supposed  preciousness  of  the  product:  very 
much  as  a  gold  mine  is  thought  to  yield  greater  riches  than  a  coal 
mine.  During  our  colonial  times  there  were  repeated  attempts  to 
foster  the  cultivation  of  the  mulberry  tree,  the  culture  of  silk 
cocoons,  the  reeling  of  raw  silk;  all  this  being  favored,  among 
other  reasons,  because  the  industry  was  one  of  the  then  cherished 
household  occupations.  In  the  nineteenth  century,  there  were 
recurring  efforts  to  promote  mulberry  growing  and  silk  raising. 
One  curious  episode  was  the  furore  in  the  decade  1830-40  con- 
cerning a  tree,  the  morus  multicaulis,  which  was  supposed  to  be 
as  well  adapted  for  the  silk  worm  as  the  white  mulberry  (the 
"  true  "  mulberry),  and  which  gave  rise  to  a  speculative  mania 
comparable  to  the  famed  tulip  mania.1 

In  1890,  at  the  time  when  the  McKinley  tariff  bill  stimulated 
the  extension  of  protection  in  every  direction,  there  was  a  move- 
ment for  a  duty  on  raw  silk.  It  was  opposed,  of  course,  by  the 
manufacturers;  and,  a  duty  being  hopeless,  a  bounty  of  one 
dollar  a  pound  was  actually  provided  for  in  the  bill  as  passed  by 
the  House,  but  was  eventually  dropped  by  the  Senate.  In  later 
years,  our  Department  of  Agriculture,  ever  awake,  under  the 
policy  so  long  dominant,  to  the  possibilities  of  "  acquiring  "  new 
industries,  made  experiments  with  mulberries  and  raw  silk.  Eggs 
and  mulberry  seedlings  were  procured  from  Italy,  and  manuals 
of  instruction  widely  distributed.  For  a  while  the  Department 
went  so  far  as  to  buy  cocoons  from  domestic  growers  (paying 
for  them  at  current  European  prices)  and  caused  the  filaments 
to  be  reeled  from  the  cocoons  by  its  own  employees.2  Finally 
Congress  wearied  of  the  fruitless  efforts,  and  in  1908  discontinued 
the  appropriation  for  them;    and  the  country  relapsed  into  un- 

1  Those  who  may  be  interested  in  this  little-known  episode  will  find  a  full  account 
in  a  volume  on  Silk  Culture  in  the  United  States,  New  York,  1844. 

2  The  efforts  of  the  Department  extended  through  two  periods,  one  from  1884 
to  1891,  and  another,  more  important,  from  1902  to  1908.  They  were  on  a  con- 
siderable scale;  large  quantities  of  cocoons  were  raised,  and  thousands  of  mulberry 
seedlings  planted.  See  the  Yearbook  of  the  Department  for  1903,  and  also  an  article 
by  Dr.  L.  O.  Howard,  in  the  Cyclopaedia  of  American  Agriculture,  iii,  p.  641. 


224         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

troubled  acquiescence  with  the  importation  of  every  ounce  of  raw 
silk  used  by  the  domestic  manufacturers. 

The  explanation  of  this  complete  failure  to  develop  the  produc- 
tion of  raw  silk  is  to  be  found  in  the  principle  of  comparative 
advantage.  The  usual  statement,  especially  by  protectionists, 
is  that  the  cheapness  of  foreign  labor  makes  competition  im- 
possible with  the  countries  whence  the  silk  is  imported.  Here, 
as  in  other  cases,  this  statement  means  simply  that  we  do  not 
find  here  an  advantageous  way  of  applying  our  labor. 

The  production  of  raw  silk  divides  itself  into  two  parts:  rais- 
ing the  cocoons,  and  reeling  the  filament  from  them.  There  is 
no  climatic  obstacle  to  growing  mulberry  trees  in  the  United 
States  or  to  raising  the  cocoons.  But  the  tending  of  the  larvae, 
worms,  and  cocoons  requires  minute  attention  and  wearisome 
labor.  No  use  of  labor-saving  implements  is  feasible.  It  is 
carried  on,  in  China,  Japan,  Italy,  in  rural  districts,  largely  as 
an  incident  to  other  agricultural  occupations.1 ,  Even  more  clearly 
than  in  the  case  of  the  sugar  beet,2  a  comparative  advantage  is 
lacking.  In  other  agricultural  work,  the  American  farmer  uses 
agricultural  machinery  and  those  labor-saving  devices  which  are 

1  In  Lombardy  "  the  wives  of  the  peasants  engage  in  the  business,  as  the  wives 
of  American  farmers  in  their  domestic  work  ";  in  Japan  it  is  "  usually  an  auxiliary 
industry  of  the  farmers  ";  in  China,  "  the  vast  mass  of  silk  produced  comes  from 
China  houses  where  all  members  of  the  family  take  part  in  the  work."  I  quote 
from  Sericulture  in  Italy,  Japan  and  China,  published  by  the  Silk  Association  of 
America  (1905),  pp.  5,  n,  18. 

In  France,  as  is  well  known,  bounties  have  been  given  since  1892  on  raw  silk; 
a  compromise  between  the  demands  of  the  producers  in  the  south  for  protection 
and  those  of  the  manufacturers  for  cheap  material.  Because  of  the  method  by 
which  it  was  allotted,  the  bounty  seems  to  have  stood  in  the  way  of  technical 
advance  in  the  industry;  at  all  events,  the  output  of  raw  silk  has  barely  held  its 
own.  The  bounty  was  extended  in  1909,  without  change  of  method,  for  a  twenty- 
year  period,  i.  e.,  till  1929.  Hungary  has  also  encouraged  raw  silk  production, 
by  supplying  eggs  gratis,  buying  and  distributing  cocoons,  and  building  filatures 
which  are  let  to  reelers  on  cheap  terms.  See  Antonelli,  in  Revue  Economique 
Internationale,  March,  1910. 

In  Switzerland  the  production  of  raw  silk  has  steadily  declined  since  1870  and 
now  maintains  itself  only  in  the  Italian  cantons.  Reichesberg,  Handworterbuch 
d.  Schwas.  Volkswirtschaft,  p.  962.  I  have  no  doubt  the  explanation  is  the  same 
as  for  the  American  situation:  the  industry  lacks  a  comparative  advantage  in 
Switzerland  also. 

2  See  the  discussion  of  beet  growing,  chapter  vii,  p.  88  and  passim. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      225 

adapted  to  extensive  cultivation.  The  impracticability  of  ap- 
plying them  to  cocoon  raising  means  that  here  there  is,  not 
indeed  a  disadvantage,  but  complete  lack  of  any  special  advan- 
tage. 

This  is  still  more  the  case  with  reeling.  Raw  silk  differs  from 
all  other  textile  fibres  in  the  length  of  the  fibre  unit.  From  the 
cocoon  a  long  delicate  filament  is  unwound;  a  number  of  fila- 
ments are  combined  into  the  thread,  still  delicate,  which  forms 
the  raw  silk  of  commerce.  It  comes  on  the  market  in  a  skein 
very  like  that  of  the  loose-spun  wool  or  "  worsted  "  which  women 
use  for  their  knitting.  The  unwinding  and  combining  of  the  fila- 
ments take  place  in  filatures,  with  use  of  a  reel  on  which  is  wound 
the  thread  or  strand  of  raw  silk.  Filatures  were  long  very 
small  household  affairs,  —  adjuncts  to  peasant  agriculture ;  but  in 
modern  times  have  come  to  be,  in  Japan  and  in  those  European 
countries  (Italy,  for  example)  which  produce  raw  silk,  establish- 
ments of  some  size,  with  power  for  moving  the  reels.  But 
whether  small  or  of  comparatively  large  size,  they  depend  on 
deft  handiwork  and  meticulous  labor.  The  filament  needs  to  be 
watched  every  instant.  "  In  the  treatment  of  the  cocoons,  the 
formation  of  the  thread,  —  in  short  in  the  spinning  1  and  treat- 
ment of  the  silk  itself,  —  no  noteworthy  change  has  been 
wrought,  in  spite  of  incessant  study.  .  .  .  The  winding  of  the 
single  thread  from  the  cocoon  demands  such  a  delicacy  of  treat- 
ment that  so  far  only  the  manual  dexterity  and  intelligence  of 
the  women  reelers  has  (sic)  been  able  to  cope  with  it.  All 
mechanical  processes  proposed  in  substitution  of  hand  labor 
have  failed."  2 

It  is  a  striking  and  curious  fact  that  silk  reels  have  been  greatly 
improved  by  American  ingenuity,  yet  are  not  used  by  Americans 
at  all.  A  type  of  reel  devised  by  an  American  mechanic,  a  fore- 
man in  an  American  silk  mill,  has  made  its  way  all  over  the 
world.3     Yet  no  reefing  is  done  in  the  United  States.     It  remains 

1  "  Spinning  "  would  seem  here  to  be  a  misnomer;  the  term  is  not  usually 
applied  to  the  process  of  unwinding  from  the  cocoons,  nor  even  (see  p.  228,  below) 
to  the  subsequent  preparation  of  the  raw  silk  for  weaving. 

2  Sericulture,  p.  9. 

3  The  Grant  reel,  which  originated  in  the  well-known  Cheney  mills.     Cf .  Mason, 


226        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

essentially  a  handicraft  operation,  precisely  of  the  kind  to  which 
American  labor  does  not  find  it  worth  while  to  turn. 

It  may  be  noted  at  this  point  that  the  situation  is  quite  differ- 
ent with  another  grade  of  silk,  —  spun  silk.  "  Raw  silk  "  proper 
is  that  just  described,  —  the  continuous  thread  reeled  from  the 
interior  of  the  cocoon.  The  exterior  hull  of  the  cocoon,  however, 
has  broken  fibres;  in  the  innermost  part  of  the  cocoon,  the  fibre 
becomes  so  attenuated  as  not  to  be  unwound  profitably;  and 
there  are  also  pierced  and  imperfect  cocoons  whose  filaments  are 
broken.  These  "  waste  "  fibres,  as  well  as  some  other  "  wastes," 
are  used  in  making  spun  silk.  "  In  working  spun  silk  there  is 
no  effort  to  use  the  continuous  thread  as  spun  from  the  silk  worm 
within  the  cocoon ;  but  the  cocoon  is  treated  as  a  bundle  of  fibres 
and  spun  the  same  as  cotton  and  wool  by  special  textile  machin- 
ery, adapted  to  the  characteristics  of  the  particular  fibre."  Spun 
silk  is  more  amenable  to  treatment  by  fast-moving  machinery 
than  reeled  silk;  and  this  circumstance,  has  had  important  con- 
sequences in  the  development  and  geographical  distribution  of 
the  spun  silk  branch  of  the  manufacture. 

Raw  silk  proper,  however,  differs  essentially  from  the  other 
textile  fibres.  The  filament  from  the  cocoon,  though  continuous, 
is  not  even.  Nature  is  always  irregular,  and  the  silk  worm's 
thread  has  not  the  mechanical  regularity  of  man's  product.  For 
this  reason  the  silk  manufacture  retained  its  ancient  characteris- 
tics for  a  century  after  the  other  textile  industries  had  been 
transformed.  Raw  silk  was  not  so  readily  amenable  to  the 
machine  processes.  The  very  fact  that  cotton  and  wool  have 
short  fibres,  and  that  the  fibres  must  be  separated  and  evened 
by  carding,  then  twisted  together  methodically  by  roving  and 
spinning,  makes  these  materials  a  ready  prey  to  the  machine. 
The  tenuous  and  comparatively  uneven  silk  fibre  long  resisted. 
The  main  processes  in  the  manipulation  of  raw  silk,  —  "  throw- 
ing "  (the  process  corresponding  to  spinning)  and  weaving, — 
remained  handicraft  and  household  industries  long  after  power- 

The  Silk  Industry,  p.  12.  The  reels  are  not  manufactured  in  the  United  States; 
the  design  is  simple,  and  the  reels  are  made  in  various  parts  of  the  world,  where- 
ever  used. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      227 

driven  machinery  had   conquered  in   the   cotton  and  woolen 
industries. 

For  this  reason,  the  industry  had  no  hopeful  prospect  when 
introduced  into  the  United  States  under  the  stimulus  of  the  war 
duties.      The  peculiar  qualities  of  the  raw  material  seemed  to 
make  it  ill  adapted  to  the  prevailing  manufacturing  methods. 
Apparently  it  was  likely  to  be  for  an  indefinitely  long  period  at  a 
comparative  disadvantage,  and  therefore  to  remain  in  unceasing 
dependence  on  protection.      During  the  early  stages  of  the  in- 
dustry attention  was  repeatedly  called  to  the  special  difficulties 
of  the  industry  by  a  highly  competent  observer,   Mr.  W.  C. 
Wyckoff,  the  first  secretary  of  the  Silk  Association  of  America. 
The  raw  material,  he  pointed  out,  is  uneven  and  irregular.     It 
is  likely  to  break  in  the  course  of  weaving,  indeed  in  any  of  the 
processes.     "  A  loom  may  have  to  be  suddenly  stopped.     It  is 
always  the  same  story,  —  breakage,  stoppage,   waste  of  time 
(labor)  and  material.     The  loss  of  time  when  machinery,  running 
at  high  speed,  has  to  be  stopped,  becomes  a  serious  matter,  from 
the  mere  fact  that  there  is  no  production  during  the  stoppage. 
'  It  costs,'  said  a  manufacturer,  '  fully  five  times  as  much  to  tie 
a  knot  in  this  country  as  in  France.'  "     And  again:  "  it  is  neces- 
sary to  have  all  the  threads  of  warp  and  woof  as  perfect  as  pos- 
sible, so  that  there  shall  be  no  stoppage  of  the  power  loom."    In 
Europe,  "  the  silk  manufacturer  is  a  mere  contractor.     He  buys 
the  tram  and  organzine  —  i.  e.,  filling  and  warp  —  which  have 
been  made  in  a  separate  factory.      He  sends  this  material  to 
another  establishment,  a  dye-house.      Finally  he  puts  it  out  to 
weavers  who  have  looms  in  their  own  homes." *    This  is  the  famil- 
iar domestic  system.      The  American  manufacturer,  however, 
was  compelled  by  the  social  and  industrial  conditions  surrounding 
him  to  try  to  substitute  for  it  concentration  in  the  factory, 
power-driven  machinery,  wage  labor;  yet  the  nature  of  the  raw 
material  imposed  obstacles  to  carrying  out  the  change  with 
advantage. 

1  See  the  passages  from  Wyckoff  quoted  by  me  in  the  Quarterly  Journal  of 
Economics,  iii,  pp.  271-273  (1889);  also  in  my  Tariff  History  of  the  United  States, 
4th  edition,  pp.  381  seq. 


228         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

Commenting  on  this  situation,  I  remarked  in  1889,  in  a  pas- 
sage which  the  subsequent  course  of  events  has  not  contradicted: ! 
"  A  struggle  seems  to  be  going  on  in  the  silk  industry  between 
large  factories  and  machinery,  on  the  one  hand,  and  household 
industry  and  manual  labor,  on  the  other.  .  .  .  The  nature  of 
the  silk  fibre  is  an  obstacle  to  that  extensive  use  of  labor-saving 
machinery  which  is  characteristic  of  American  industry.  The 
field  is  not  promising  for  the  ingenuity  and  inventiveness  which 
give  American  manufactures  their  distinctive  advantages.  .  .  . 
It  may  indeed  happen  that  Yankee  ingenuity  will  revolutionize 
the  conditions  of  this  industry.  The  attempts  of  the  American 
manufacturers  to  get  a  more  even  supply  of  raw  silk,  and  to  apply 
machinery  to  its  conversion  into  silk  goods,  may  prove  successful, 
if  not  throughout  the  industry,  at  least  in  many  parts  of  it.  .  .  . 
Should  there  continue  in  the  future  a  progress  such  as  has  un- 
doubtedly been  made  in  recent  years  [1880-1888]  in  the  American 
silk  manufacture,  it  may  happen  in  the  end  that  most  sorts  of 
silks  will  be  made  here  as  cheaply  as  abroad,  and  that  the  abolition 
of  protective  duties  would  affect  the  silk  manufacture  as  little  as 
it  would  now  affect  the  bulk  of  the  cotton  manufacture.  If  this 
proves  to  be  the  case,  we  shall  have  an  example,  and  a  striking 
one,  of  the  successful  application  of  protection  to  young  indus- 
tries." 

These  extracts  anticipate  in  part  what  is  to  come;  but  they 
serve  to  show  what  are  the  special  problems  in  the  history  of  the 
American  silk  industry.  The  nature  of  these  problems  will 
appear  more  in  detail  as  we  proceed  to  consider  step  by  step  the 
several  stages  in  the  manufacturing  operations. 

After  reeling,  the  next  process  is  throwing.  The  long  filaments 
of  the  raw  silk,  —  continuous  threads  from  beginning  to  end  of  the 
skein,  —  are  doubled  and  tripled,  and  so  given  strength  and 
consistency  for  enabling  them  to  be  used  in  weaving.  Thrown 
silk,  the  material  turned  over  to  the  loom,  is  sometimes  called 
yarn,  since  it  corresponds  to  cotton  or  woolen  yarn;  it  is  espe- 
cially so  called  by  Americans  in  very  recent  times,  because  the 
power-driven  machine  has  succeeded  in   taking  possession  of 

1  Quarterly  Journal  of  Economics,  iii  (1889),  pp.  273-276. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      229 

silk  throwing.  But  the  term  silk  yarn  is  more  commonly  used 
to  denote  the  spun  silk  which  is  really  spun  from  the  shorter 
fibres  of  the  cocoon.  Thrown  silk  is  quite  a  different  thread, 
and  is  generally  known  by  names  of  its  own.  That  used  for  weft, 
which  is  soft  and  comparatively  open,  is  called  "  tram  ";  that 
used  for  warp,  more  closely  twisted,  is  called  organzine. 

Silk  throwing  continued  to  be  a  handicraft  operation  until  the 
latter  part  of  the  nineteenth  century;  just  as  carding  and  spin- 
ning had  so  remained  until  the  corresponding  part  of  the  eigh- 
teenth century.  It  was  carried  on  in  the  throwsters'  homes,  often 
as  an  accessory  to  agriculture  or  other  occupations.  Two  genera- 
tions ago  the  silk  throwster  was  as  important  and  characteristic  a 
figure  for  this  industry  as  the  hand  loom  weaver  was  a  century 
ago  for  the  other  textile  industries.  Like  the  hand  loom  weaver, 
he  has  been  displaced  by  machinery.  Not  indeed  entirely;  for 
in  some  parts  of  Europe,  and  almost  throughout  the  Orient,  the 
silk  throwster,  like  the  silk  weaver  on  hand  looms,  still  holds  a 
considerable  place.  But  in  the  countries  of  advanced  industrial 
methods,  he  has  quite  disappeared;  more  particularly  in  the 
United  States  and  in  England.1 

The  significant  fact  for  our  inquiry  is  that  the  American 
industry  has  gone  ahead  independently,  not  following  the  lead 
of  other  countries.  Newly  invented  throwing  machines  came  on 
the  market  in  the  United  States  during  the  decade  1880-90,  — 
all  in  the  direction  of  automatic  action  and  great  speed.  As 
early  as  1890  throwing  spindles  were  operated  at  a  speed  no  less 
than  that  of  cotton  spindles,  10,000  revolutions  per  minute;  ten 
years  later,  by  1900,  the  number  of  revolutions  had  been  raised 
to  11,000  and  12,000.  A  natural  consequence  of  the  perfection 
of  the  machines  was  a  change  in  the  character  of  the  persons  em- 
ployed to  tend  them.     The  silk  throwsters  had  been  men.     The 

1  Silk  throwing  in  Italy  and  France  was  long  carried  on  in  small  quasi-handi- 
craft  establishments  with  the  aid  of  water-power;  hence  called  in  France  "  moulin- 
age."  It  is  still  in  France  an  industry  on  a  very  small  scale;  petty  factories  with 
an  average  of  less  than  2,000  spindles,  working  universally  on  orders  from  the 
manufacturers.  Beauquis,  Histoire  economique  de  la  sole,  p.  150.  In  England, 
though  silk  throwing  has  ceased,  the  Silkthrowsters'  Company,  established  in 
1629,  still  maintains  a  nominal  existence  among  the  Livery  Companies  of  London. 


230         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

new  throwing  machines  were  operated  largely  by  women  and 
children.  The  change  had  consequences  similar  to  other  historic 
transitions  in  textile  manufacturing,  —  from  hand  loom  weaving 
to  power  loom  weaving,  from  the  power  loom  to  the  automatic 
loom,  from  mule  spinning  to  ring  spinning.1  In  its  social  aspects, 
it  opened  grave  questions.  But  its  cheapening  effect  was  great 
and  rapid.  The  cost  of  converting  raw  silk  into  tram  and 
organzine  was  lowered  to  one-quarter  and  one-fifth  of  what  it 
had  been  a  generation  before.2 

Similar  changes  took  place  in  weaving.  Silk  woven  fabrics 
are  divided  into  two  classes,  sharply  separated  as  regards  manu- 
facture and  commercial  dealings:  dress  silks  (broad  goods)  and 
ribbons  (narrow  goods) .  Of  these,  the  latter,  the  ribbon  branch 
of  the  industry,  has  proved  the  more  amenable  to  the  machine 
processes.  The  first  ribbon  looms  in  the  United  States  were  of 
German  or  Swiss  pattern.  In  1889  a  high-speed  automatic  rib- 
bon loom  was  invented  in  this  country.3  It  proved  the  beginning 
in  a  series  of  improvements  in  ribbon  weaving.  Double-deck 
looms  succeeded  single-deck  looms.  The  "  weaver  "  became,  as 
he  (or  she)  inevitably  does  with  a  perfected  power  loom,  a  mere 
machine  watcher  and  tender,  whose  duty  is  mainly  to  keep  up 
the  supply  of  spools  and  tie  broken  threads.  And  the  same  sort 
of  social  consequence  ensued  as  in  throwing:  in  larger  and  larger 
proportion  there  was  resort  to  the  labor  of  women. 

Similar  changes  took  place  in  the  manufacture  of  broad  goods. 
Here  too,  the  first  looms,  brought  over  from  Europe,  were  soon 
superseded  by  looms  of  American  make.  As  is  known  to  every  one 
conversant  with  the  history  of  the  textile  industries  of  the  United 
States,  weaving  machinery  was  from  the  outset  and  has  remained 
a  peculiarly  inviting  and  fertile  field  for  American  ingenuity; 
and  the  advances  in  silk  weaving  have  apparently  been  no  less 
marked  than  in  other  industries.     There  have  not  been,  indeed, 

1  See  below,  pp.  270,  273  on  the  automatic  loom  and  ring  spinning. 

2  In  the  Census  of  1900,  it  is  stated  in  the  Report  on  Silks  (p.  218)  that  the  cost 
of  converting  one  pound  of  raw  silk  into  organzine  was  lowered  from  $4.50  in  1870 
to  60  @  75  cents  in  1900.  On  the  employment  of  women  and  children,  see  ibid., 
p.  209. 

3  Allen,  Silk  Industry  of  the  World,  p.  29. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      23 1 

such  striking  triumphs  as  those  of  the  automatic  loom  in  the 
cotton  manufacture.1  But  silk  looms  have  been  steadily  im- 
proved in  the  direction  of  lightness,  simplicity,  swiftness  of 
running,  steadiness  of  product.  The  stage  was  reached  before 
long  where  the  weaver  could  be  called  to  tend  to  more  than  one 
loom;  a  change  which,  as  ever,  caused  rebellion  among  the 
operators,  who  nevertheless  in  the  end  had  to  accept  the  in- 
evitable consequences  of  the  march  of  invention.2  The  rate  of 
progress  seems  to  have  been  especially  rapid  for  broad  looms  in  the 
opening  years  of  the  present  century.  Then  an  exceptional  era  of 
general  activity  and  prosperity  led  to  a  sharply  increased  demand 
for  silks,  —  these  being  among  the  articles  which  are  peculiarly 
subject  to  fluctuations  in  demand  between  good  times  and  bad 
times.  It  may  be,  also,  that  the  high  specific  duties  levied  by  the 
tariff  act  of  1897  added  to  the  demands  on  the  American  silk 
makers,  since  they  served  to  shut  out  effectually  foreign  competi- 
tion in  the  grades  which  were  chiefly  made  at  home.  The  rate 
of  advance  hence  was  extraordinarily  rapid  in  quantity  of  output; 
while  invention  improved  both  the  efficiency  of  the  machinery 
and  the  quality  of  the  products.3 

No  change  in  the  silk  industry  of  the  United  States,  nay  of 
any  other  country  or  any  other  industry,  has  been  more  striking 
than  the  rapid  and  complete  displacement  of  hand  looms.  Dur- 
ing the  decade  after  the  civil  war,  hand  looms  and  their  weavers 

1  See  below,  p.  273. 

2  The  much-discussed  strike  of  19 13  among  the  Paterson  silk  operatives,  in  which 
the  Industrial  Workers  of  the  World  (I.  W.  W.)  took  so  active  a  part,  began  among 
the  broad  silk  weavers,  in  opposition  to  the  introduction  of  a  three  loom  and  four 
loom  weaving  system. 

3  The  Silk  Association  Reports  show  that  new  looms  were  installed  in  the  United 
States  as  follows :  — 

Broad  Goods  Ribbons 

1901 2,328  356 

1902 5>5°°  213 

1003 3.797  450 

1906 1,268  383 

The  extraordinarily  rapid  growth  between  1900  and  1905  is  shown  by  the 

following  census  figures :  — 

No.  of  Establishments  Capital 

1890 472  $51  millions 

1900 483  81 

1905 624  109       ■ 


232         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

were  brought  over  from  Europe.  But  the  power  loom  appeared 
as  a  rival  at  once,  and  the  hand  loom  rapidly  disappeared.  The 
contrast  with  other  countries,  as  will  presently  appear,  is  marked: 
elsewhere  the  hand  loom  maintains  a  place  almost  equal  to  that 
of  the  power  loom.  The  figures  given  below  tell  their  own  tale 
for  the  United  States.1  The  difference  is  strictly  analogous  to 
that  in  other  industries,  and  the  explanation  is  the  same.  In  a 
country  where  labor  is  made  effective  and  wages  are  kept  high 
through  the  wide-spread  use  of  labor-saving  devices,  a  strictly 
handicraft  occupation  succumbs  because  it  suffers  under  a 
comparative  disadvantage.  The  power  loom  offers  at  least  the 
chance  of  a  comparative  advantage  on  a  par  with  the  rest  of 
the  country's  occupations. 

It  has  already  been  pointed  out  that  a  natural  consequence  of 
these  technical  advances  was  a  greater  employment  of  women 
and  children.  This  in  turn  affected  the  geographical  distribution 
of  the  American  manufacture.  Being  able  to  use  in  greater  de- 
gree the  labor  of  women  and  children,  the  industry  has  tended 
to  move  to  the  regions  where  such  labor  is  easily  got  and  the  laws 
regulating  it  are  loose  or  loosely  enforced.  Pennsylvania  and 
New  Jersey  have  the  unenviable  distinction  of  having  become, 
partly  for  this  reason,  the  important  silk  manufacturing  states  of 
the  Union.  In  New  Jersey,  just  one-half  (49.6  per  cent)  of  the  em- 
ployees in  silk  establishments  are  women;  in  Pennsylvania,  nearly 
two-thirds  (67.8  per  cent).    In  New  Jersey,  the  city  of  Paterson 

1  The  following  figures  state  the  number  of  hand  and  power  looms  in  the  two 
branches  cf  the  industry. 

187s 

1880 

1890 

1900 

1 90s 

Allen,  Silk  Industry  of  the  World,  p.  3 1 . 

The  comparatively  slow  increase  in  the  number  of  looms  for  narrow  goods  be- 
tween 1890  and  1905  is  to  be  interpreted  in  the  light  of  the  circumstance  that  each 
individual  loom  became  larger,  quicker,  more  automatic.  The  longer  persistence 
of  hand  looms  in  this  branch  of  the  industry  (1,334  such  looms  as  late  as  1890)  is 
more  apparent  than  real.  These  looms  were  used  in  1890  mainly  for  trimmings,  a 
special  and  limited  branch  of  the  narrow  goods  trade,  —  one  which  proved  a  deca- 
dent part  of  the  silk  manufacture.     See  below,  p.  247. 


Broad 
Power 

Goods 
Hand 

Narrow  Goods 
Power             Hand 

1,428 

1,005 

1,260 

809 

3,103 

1,629 

2,218 

1,524 

14,866 

413 

5.956 

1.334 

36,825 

164 

7.432 

9 

47,725 

0 

8,400 

O 

GROWTH  OF  AMERICAN  SILK  MANUFACTURE      233 

has  long  been  a  "  silk  town,"  and  especially  a  ribbon  center.  Here 
as  elsewhere,  newly  arrived  immigrants,  eager  to  swell  the  family 
incomes,  send  their  women  and  children  to  the  mills,  where  they 
are  able  to  tend  the  quasi-automatic  machines.  In  Pennsylvania, 
oddly  enough,  the  anthracite  region  formed  a  favorable  field  for 
the  silk  manufacturers.  The  miners  were  mainly  foreign  born, 
recently  arrived;  they  were  more  than  willing  to  send  women 
and  children  to  the  mills;  labor  laws  were  lax,  the  conditions  of 
enforcement  almost  farcical.  There  could  be  no  better  illustra- 
tion of  the  need  of  curbing  and  bridling  the  industrial  forces  of 
the  time.  The  machine  immensely  increases  the  effectiveness  of 
labor;  but  legislation  and  a  strong  conserving  standard  among 
the  laborers  are  needed  to  prevent  it  from  contributing  to  evil 
conditions.  And  yet,  so  far  as  the  bare  matter  of  advantage  in 
production  is  under  consideration,  the  case  has  but  one  side: 
perfected  machinery,  that  needs  to  be  tended  only  by  a  slip  of  a 
girl,  means  effectiveness  and  cheapness,  and  the  country  in  which 
the  greater  mechanical  perfection  is  reached  has  a  comparative 
advantage  in  the  industries  where  it  is  found.1 

Still  another  consequence  of  the  progress  of  invention,  in  quite 
a  different  direction,  has  been  a  change  in  the  sources  of  supply 
for  raw  silk.  Japan  has  largely  supplanted  China;  and  this 
under  the  influence  chiefly  of  American  demand  and  American 
suggestions.  The  irregularity  of  the  raw  silk  fibre  is,  to  repeat, 
an  obstacle  to  its  manipulation  by  power-driven  machinery. 
Spindles  and  looms  can  be  adjusted  to  the  most  tenuous  threads, 
so  long  as  they  are  homogeneous.  No  doubt  the  finer  grades 
of  goods  always  remain  less  easily  subjected  to  rapid  machinery; 
but  as  long  as  the  material  is  even,  the  possibilities  of  delicate 
balance  and  adjustment  are  astonishing.  Irregularities,  how- 
ever, always  mean  breakage,  stoppage,  loss  of  time,  incomplete 
utilization  of  plant;  they  mean,  also,  greater  need  of  specialized 
skill  on  the  part  of  the  individual  operative.  Hence  the  American 
manufacturers  sought  to  secure  supplies  of  uniform  raw  silk.    The 

1  On  labor  conditions,  see  Mason,  Silk  Industry,  pp.  50  seq.;  and  the  Federal 
Report  on  Woman  and  Child  Wage-Earners,  191 2,  iv;  summarized  in  the  Survey, 
May  18,  191 2.  In  Pennsylvania  only  9  per  cent  of  those  employed  in  the  silk 
mills  of  the  state  are  men;  67.8  per  cent  are  women,  23.2  per  cent  are  children. 


234        S0ME  ASPECTS  OF  THE  TARIFF  QUESTION 

Chinese,  who  had  long  been  the  main  producers  and  exporters, 
proved  unwilling  or  unable  to  supply  such  raw  silk  as  the  Ameri- 
cans wanted;  partly  perhaps  from  pervading  stolid  conservatism, 
largely  because  of  the  impossibility,  under  existing  political  and 
social  conditions,  of  spreading  and  enforcing  the  needed  instruc- 
tions. The  Japanese  rose  to  the  opportunity.  There  is  no  more 
characteristic  illustration  of  the  industrial  and  intellectual  up- 
rising of  that  remarkable  people,  —  the  cooperation  of  a  guiding 
oligarchy  with  a  responsive  mass.  Instructions  on  the  proper 
methods  of  reeling  silk  were  spread  through  the  country  by  the 
government  and  by  the  leading  export  firms.  Model  filatures  for 
reeling  were  established.  The  Japanese  prepared  raw  silk  such 
as  the  American  manufacturers  could  more  advantageously  use. 
Their  country  took  the  place  of  China  as  the  main  source  of 
supply.  Raw  silk  became  a  great  article  of  export  from  Japan, 
and  American  supplies  came  preponderantly  from  that  country.1 

1  See  on  this  subject  the  account  in  Mason,  Silk  Industry,  pp.  15  seq.  On  ths 
continued  endeavors  of  the  American  manufacturers  to  improve  the  quality  of 
Chinese  raw  silk,  see  Thirty-eighth  Report  of  the  Silk  Association,  pp.  24,  25.  "  A 
great  proportion  of  the  Canton  silks  cannot  be  economically  handled  by  the  Ameri- 
can manufacturer  on  account  of  defective  reeling.  .  .  .  We  suggest  that  the  system 
which  has  improved  the  working  qualities  of  Japan  silks,  i.  e.,  re-reeling  the  skeins, 
if  used  in  Canton,  would  so  vastly  enhance  the  value  of  Canton  filatures  that  the 
American  buyers  would  gladly  pay  such  additional  price  as  to  more  than  compen- 
sate the  reelers."  L.  Duran,  in  his  trade  book  on  Raw  Silk  (1913),  writes:  "  It  is 
gratifying  to  see  the  Japanese  reelers  doing  their  utmost  to  improve  the  quality 
of  their  silks"  (p.  114). 


CHAPTER  XV 

THE  SILK  MANUFACTURE,   CONTINUED.       EUROPEAN  AND 
AMERICAN  CONDITIONS;    IMPORTS 
AND   DOMESTIC  PRODUCTION 

The  principle  of  which  so  much  has  been  made  in  the  preceding 
chapter,  —  that  of  comparative  advantage,  —  calls  for  a  consider- 
ation not  of  the  American  silk  industry  only,  but  of  that  in  com- 
peting countries  as  well.  And  the  change  from  handicraft  to 
machinery  did  not  take  place  in  the  United  States  alone.  A 
belated  industrial  revolution  set  in,  affecting  all  the  producing 
countries.  But  it  affected  them  in  different  degrees,  and  with 
different  results  for  the  various  branches  of  the  industry.  It  is 
instructive  to  compare  the  course  of  development  in  the  several 
countries.1 

A  general  indication  of  the  situation  is  got  by  comparing  the 
use  of  hand  looms  and  power  looms.  The  following  figures  are 
given  for  the  year  1900  by  a  competent  authority.2 

Power  Looms  Hand  Looms 

France    30,600  60,000 

Switzerland   JS^oo  JQjS00 

Crefeld  (Germany) 9,500  6,900 

Italy 8,500  11,000 

It  appears  that  in  each  of  those  countries  a  large  number  of 
hand  looms  were  still  in  use  as  late  as  1900.  The  proportion  in 
Germany,  or  at  least  in  the  Crefeld  district,  was  less  than  in 
France,  Switzerland,  Italy;  but  everywhere  hand  looms  per- 
sisted. The  contrast  is  striking  with  the  complete  disappearance 
of  hand  looms  in  the  United  States. 

1  The  descriptions  of  European  conditions  which  follow  rest  on  scattered  notes 
gathered  from  various  sources,  and  make  no  pretense  of  exhaustiveness.  So  far 
as  I  know,  this  interesting  phase  of  recent  industrial  history  has  received  scant 
attention. 

2  Allen,  Silk  Industry  of  the  World,  p.  41.  The  figures  for  Germany  are  not  for 
the  whole  of  that  country,  but  only  for  the  district  of  Crefeld,  the  chief  manufactur- 
ing center. 

235 


236         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

In  the  Crefeld  district  of  Germany,  the  most  important  and 
highly  organized  silk  center  of  that  country,  the  transition  from 
household  industry  to  the  factory  system  set  in  during  the  last 
quarter  of  the  nineteenth  century.  The  power  loom  came 
into  use  in  the  decade  1880-90,  and  was  increasingly  used  after 
1890.  It  seems  to  have  been  perfected  earliest  for  velvet  ribbons. 
An  invention  of  1887  gave  a  great  impetus  to  the  velvet  ribbon 
industry  of  the  district,  and  by  the  beginning  of  the  present 
century  hand  looms  for  these  ribbons  had  almost  entirely  dis- 
appeared. For  silks  also  the  power  loom  made  its  way  rapidly 
after  1885.  Yet  hand  looms  continued  to  be  used  for  silks, 
both  broad  and  narrow.  Some  specialties  and  goods  of  unusual 
pattern,  of  which  but  a  small  quantity  of  any  one  kind  can  be 
marketed,  are  still  made  to  most  advantage  on  hand  looms. 
Heavy  silks,  such  as  wear  long  and  well,  are  also  so  made.  But 
the  lighter,  less  durable  fabrics,  often  made  with  an  admixture 
of  cotton  or  artificial  silk,  have  come  within  the  domain  of  the 
power-driven  machine.  These  differences,  as  will  presently  be 
explained,  are  of  no  little  significance  for  the  problems  of  inter- 
national trade  and  for  the  rivalry  between  the  Continent  and  the 
United  States.1 

Somewhat  similar  to  Germany  is  Switzerland,  where  Basel 
and  Zurich  are  important  silk  manufacturing  centers.  That 
part  of  the  German  industry  which  is  near  the  Swiss  border, 
toward  the  south,  belongs  in  reality  to  the  latter  country,  being 
mainly  conducted  by  enterprising  Switzers  who  have  transferred 
their  establishments  across  the  border  because  of  the  German 
tariff.  Basel  is  a  center  chiefly  for  ribbons,  Zurich  for  broad 
goods.  It  is  in  the  latter  that  the  machine  seems  to  have  con- 
quered most  decisively.  In  general,  it  is  the  Swiss  and  Germans 
who  are  the  machine-using  people  of  the  Continent;  and  accord- 
ingly the  power  loom  and  all  that  goes  with  it  have  been  intro- 
duced furthest  in  those  two  countries.  But  in  Switzerland,  as 
in  Germany,  household  production  maintains  a  place.     In  Basel 

1  On  the  German  transition,  see  H.  Brauns,  Der  Uebergang  von  der  Handweberei 
sum  Fabrikbetrieb,  Schmoller's  Forschungen  (1906),  pp.  33-37,  44.  Cf.  Botzkes, 
Seidenwarenprodnktion  und  Seidenwarenhandcl  (1909),  p.  28. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      237 

the  ribbon  "  manufacturers  "  are  largely  contractors,  who  supply 
material  to  scattered  household  weavers  and  buy  from  them  the 
ribbons  or  other  woven  fabrics.  The  Swiss  peasants,  and  espe- 
cially the  peasant  women,  continue  to  ply  the  loom  during  the 
long  winters.  This  domestic  industry  holds  its  own  tenaciously. 
As  late  as  1905  the  number  of  power  looms  in  Switzerland  ex- 
ceeded but  little  the  number  of  hand  looms.1 

In  France,  which  had  so  long  been  the  leading  silk  manufactur- 
ing country,  the  industry  clings  even  more  to  the  old  ways.  The 
number  of  hand  looms  is  about  double  the  number  of  power 
looms;  the  domestic  weaver  holds  his  place.  French  silks,  espe- 
cially those  made  for  the  export  trade,  are  of  high  quality. 
They  depend  for  their  sustained  superiority  on  excellence  of 
pattern  and  perfection  of  make.  The  cheap  everyday  silks, 
turned  out  in  great  quantities  of  one  pattern,  are  characteristic 
of  the  machine  industry  of  other  countries,  especially  of  the 
United  States.  Limited  patterns  and  sterling  quality,  catering 
to  the  well-to-do  and  the  rich,  are  the  typical  products  of  the 
French  industry;  and  these  are  precisely  the  traditional  charac- 
teristics of  the  silk  manufacture  as  it  was  before  the  machine 
began  to  invade  it.2 

1  In  Basel  there  were  in  1908 

In  household  use    4,057  looms 

In  factories i,75°      " 

Three-quarters  of  the  household  weaving  was  done  by  women;    and  agriculture 

was  the  main  occupation  of  those  engaged  in  weaving.     See  Thiirkauf,  Die  Basler 

Seidenindustrie,  pp.  ix,  77,  181.     For  Switzerland  as  a  whole  I  find  these  figures 

for  1905  (Botzkes,  p.  25) :  — 

Power  looms 14.015 

Hand  looms i3,°4* 

2  A  well-informed  American  (or  Americanized  ?)  observer  wrote  thus  of  the 
French  silk  industry  in  19 13:  — 

"  Until  1875  the  looms  of  Lyons  were  exclusively  worked  by  hand.  At  present 
there  are  yet  about  15,000  jacquard  hand  looms  in  Lyons  and  surrounding  villages, 
making  special  kinds  of  goods,  mostly  high-class  brocades.  In  more  recent  years, 
especially  the  last  two  decades,  a  number  of  manufacturers  have  built  large  mills 
in  order  to  weave  larger  quantities  of  pile  fabrics,  but  the  majority  of  manufacturers 
are  still  placing  orders  outside  '  a  facon.'  .  .  . 

"  How  long  Lyons  will  retain  her  present  supremacy  over  her  formidable  com- 
petitors is  a  hard  thing  to  guess.  Silk  manufacturing  is  growing  in  such  enormous 
proportions  in  the  United  States,  Germany,  and  Switzerland,  that  perhaps  they 


238         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

An  interesting  phase  of  the  domestic  industry  in  all  the  coun- 
tries of  the  Continent  is  the  application  of  electric  power  to  the 
household  loom;  or  rather,  the  introduction  into  domestic  in- 
dustry of  a  new  type  of  loom  driven  by  electric  power.  The 
possibility  of  dividing  and  transmitting  the  electric  current  makes 
it  feasible  to  secure,  in  some  degree  at  least,  the  advantages  of 
power  without  the  concentration  and  the  large-scale  operation 
which  are  the  inevitable  concomitants  of  the  direct  use  of  steam. 
Electricity  has  been  parcelled  out  to  small  users  in  various  bran- 
ches of  industry,  —  cutlery  and  other  metal  trades,  and  various 
branches  of  the  textile  industries.  In  silk  weaving  it  has  been 
thus  utilized  in  Switzerland,  in  Germany,  in  France.  The  water 
power  of  Switzerland  and  her  winter-bound  yet  industrious 
peasantry  have  led  to  an  extended  use  of  electric  household  looms, 
the  wires  transmitting  the  water-generated  power  to  the  deepest 
recesses  of  the  mountain  valleys.1  Observers  differ  on  the  poten- 
tialities of  this  movement.  To  some  it  seems  to  promise  the 
salvation  of  the  domestic  industry,  and  its  maintenance  for  an 
indefinite  time,  —  nay,  even  a  reaction  against  the  factory.  By 
others  it  is  thought  but  a  temporary  phase,  only  delaying  for  a 
time  the  inevitable  universalization  of  concentrated  large-scale 
production.  Doubtless  the  factory  will  prevail  eventually  in 
most  industries;   but  in  the  silk  manufacture  the  nature  of  the 

may  manage  eventually  to  put  the  French  out  of  business  through  cheaper  work- 
manship and  larger  output.  The  economists  say  that  the  silk  business  in  Lyons 
has  not  progressed  during  the  last  decade,  but  they  still  recognize  that  it  is  in 
Lyons  alone  that  can  be  found  the  highest  grades  of  silks  and  the  most  beautiful 
designs  (one  has  only  to  pay  a  visit  to  the  Lyons  Art  Museum  to  be  convinced  of 
this  assertion).  The  royalties  and  courts  of  all  nations,  for  their  pageants,  cannot 
find  elsewhere  silks  sold  at  hundreds  of  francs  per  yard  and  worth  it."  —  L.  Duran, 
Raw  Silk,  pp.  75,  77. 

Beauquis,  Histoire  economique  de  la  soie,  p.  245,  gives  the  following  figures  for 

the  Lyons  region : 

Hand  looms  Power  looms 

1873  105,000  6,000   (1875) 

1888  75.000  19,000 

1903  60,000  38,000 

1  See  the  interesting  map  prefixed  to  Thiirkauf,  Die  Basler  Seidenindustrie; 
cf.  p.  211.  See  also,  on  the  general  possibilities,  Brauns,  loc.  tit.,  p.  130,  and 
Wilbrandt,  Die  Weber  in  der  Gegenwart  (1906),  pp.  95,  109. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      239 

raw  material  and  the  peculiarities  of  the  market  seem  to  give 
unusual  opportunities  to  household  industry  fortified  by  this 
utilization  of  electric  power. 

A  peculiar  situation  has  developed  in  England.  The  old  silk 
industry  has  disappeared;  but  a  new  one  has  arisen  in  its  place. 
Both  the  disappearance  of  the  old  and  the  emergence  of  the  new 
are  instructive. 

The  silk  manufacture  was  introduced  into  England  in  the  six- 
teenth and  seventeenth  centuries  by  Flemish  and  Huguenot 
refugees.  Carried  on  as  a  typical  "  domestic  "  industry,1  it  was 
especially  favored  by  the  protective  legislation  of  the  succeeding 
period.  Even  after  the  decisive  blow  had  been  dealt  the  protec- 
tive system  through  the  abolition  of  the  corn  laws  in  1846,  a  con- 
siderable protecting  duty  was  retained  on  silks.  Not  until  the 
Franco-British  commercial  treaty  of  i860  were  they  admitted 
free  into  Great  Britain;  this  being  the  very  last  step  in  carrying 
into  effect  the  policy  of  free  trade. 

The  British  silk  manufacture,  as  it  stood  in  i860,  succumbed 
under  the  new  regime.  It  had  been  conducted  by  the  same 
methods  as  when  first  introduced  from  France.  It  was  a  handi- 
craft industry,  and  could  not  hold  its  own  against  the  competi- 
tion of  the  continental  products  of  the  same  industrial  type.  An 
almost  romantic  part  of  it  was  carried  on  in  the  Spitamelds  dis- 
trict of  London,  where  the  Huguenots  had  first  gathered  and 
where  the  industry  had  long  been  carried  on  by  them  and  their 
descendants.  The  Spitalfields  industry  was  decadent  even  before 
i860;  it  had  been  handicapped  by  the  soot  and  clouds  of  London 

1  On  the  eighteenth  century,  see  the  memoranda  in  Held,  Zwei  Biicher  zur  sozialcn 
Geschichte  Englands,  p.  560.  On  the  continuance  of  the  "  cottage  factories  " 
through  the  middle  of  the  nineteenth  century,  see  the  Report  of  the  (Chamberlain) 
Tariff  Commission,  "  Evidence  on  the  Silk  Industry,"  paragraph  3390.  A  former 
silk  manufacturer  of  Coventry  remarked,  "  The  cottage  factories  were  generally 
built  to  hold  two  or  three  looms,  and  generally  the  husband,  wife,  or  eldest  son  or 
daughter  used  to  attend  the  two  or  three  looms.  ...  I  have  seen  the  High  Street 
in  front  of  our  warehouse  crowded  with  carriers'  carts  [bringing  silk  goods  from  the 
neighboring  villages]  for  several  hundred  yards  up  the  street."  This  Tariff  Com- 
mission, organized  under  the  leadership  of  Joseph  Chamberlain  as  part  of  the 
"  tariff  reform,"  i.  e.,  protectionist  movement,  is  not  to  be  confounded  with  official 
commissions. 


240         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

and  weakened  by  the  drifting  of  its  workpeople  to  other  industries. 
After  that  fatal  date,  only  a  few  hand  loom  weavers  remained ; 
and  these  still  produce  a  few  specialties  for  West  End  retailers,  — 
a  contrast  to  the  50,000  persons  once  employed  in  the  district.1 
Other  places,  —  Coventry,  Macclesfield,  Manchester,  —  also 
had  carried  on  a  considerable  silk  industry;  since  i860  it  has 
shrunk  or  disappeared.  Silk  throwing,  formerly  a  trade  of  im- 
portance, has  been  entirely  given  up.  Most  of  the  hand  looms, 
once  thousands  in  number,  have  gone.  Macclesfield  in  the  old 
days  had  6,000  or  8,000  hand  looms;  perhaps  a  1,000  such  re- 
main.2 In  other  silk  centers  of  former  days,  a  small  industry, 
in  odds  and  ends  for  local  sales,  continues  to  hold  a  place. 3  But 
the  remnant  is  of  no  considerable  industrial  importance,  and  it 
is  dwindling. 

A  silk  industry,  however,  still  remains  in  England,  or  rather 
a  congeries  of  industries.  Some  are  adaptations  or  growths  from 
the  old.  Certain  specialties  continue  to  be  made,  more  or  less 
after  the  old  methods:  rich  brocades,  heavy  damasks  for  furni- 
ture and  decorative  purposes.  Large  hand  looms,  run  by  skilled 
men,  continue  to  be  used  for  these  goods.  Irish  poplins  also 
(made  of  silk  and  wool  mixed)  are  made  on  hand  looms,  and  hold 
their  own.4  But  far  more  important  is  an  industry  quite  new: 
the  manufacture  of  spun  silk  yarns  and  fabrics.  While  the 
making  of  thrown  silk  has  disappeared  from  England,  —  whatever 
thrown  silk  the  English  still  use  is  imported,  —  that  of  spun 

1  On  the  remnant  of  the  Spitalfields  industry,  see  Booth's  Life  and  Labour  in 
London,  vol.  iv,  ch.  viii  (edition  of  1897);  and  an  excellent  paper  by  Mr.  F.  Warner, 
a  silk  manufacturer,  in  the  Journal  of  the  Society  of  Arts,  1903-04,  pp.  124,  131. 
Mr.  Warner  remarks,  "  In  the  Spitalfields  the  weavers,  draughtsmen,  jacquard 
machinists,  loom  builders,  card  cutters,  and  other  mechanics,  possessing  a  knowledge 
which  had  for  generations  been  handed  down  from  father  to  son  .  .  .  were  com- 
petent and  skilful."  But  he  adds  that  the  "  manufacturers  "  were  inefficient, 
and  had  "  no  taste,  natural  or  acquired." 

2  See  the  Report  of  the  (Chamberlain)  Tariff  Commission,  "  Evidence  on  the  Silk 
Industry,"  paragraph  3260.  The  whole  of  the  evidence  in  this  publication  is  in- 
structive. 

3  For  example,  the  town  of  Leek;  see  Report  of  the  Tariff  Commission,  paragraph 

3275- 

4  See  the  Report  of  the  Tariff  Commission,  paragraphs,  3377,  3378,  3396,  3398; 
Warner's  paper,  cited  above,  p.  128. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      24 1 

silks  flourishes.  As  has  already  been  explained,  spun  silk  is 
made  from  "  waste  "  silk.  As  Americans  in  general  do  best  in 
weaving,  so  the  English  do  best  in  spinning;  their  special  aptitude 
for  this  in  all  textile  industries  x  being  due  in  part  to  climatic 
advantages,  but  in  large  part  to  causes  less  easy  of  discernment. 
The  success  of  the  English  in  spinning  silk  is  in  striking  contrast 
with  their  abandonment  of  silk  throwing.  New  machinery  has 
been  devised;  a  great  industry  has  grown  up.  And  not  only 
does  the  spinning  industry  hold  its  own  within  the  country,  but 
exports  of  silk  yarns  take  place  to  the  Continent  and  the  United 
States.  The  case  is  one  among  those,  puzzling  at  first,  where  the 
same  commodity  moves  two  ways,  being  both  imported  and  ex- 
ported. The  explanation  clearly  is  that  the  goods  which 
pass  in  these  cross-currents  are  of  different  grades  and  qualities. 
It  is  the  finest  counts  of  silk  yarns  that  are  exported  from  Eng- 
land, just  as  are  the  finest  counts  of  cotton  yarns.  Thrown  silk 
meanwhile  is  imported  into  England.  A  few  woven  goods,  espe- 
cially goods  of  mixed  materials,  are  again  exported;  so  that,  while 
the  imports  of  silk  goods  into  England  have  greatly  increased, 
the  exports  of  silks  have  on  the  whole  held  their  own.2 

From  the  protectionist  point  of  view,  the  decline  of  the  older 
silk  manufacture  in  England  is  a  clear  national  misfortune.  An 
industry  has  gone;  so  much  employment  has  been  lost.     In  the 

1  Cf.  what  is  said  below  of  cotton  and  woolen  spinning,  pp.  290,  357. 

2  Mr.  Warner,  in  the  paper  already  cited,  said  (pp.  128,  130,  136):  "  Silk  throw- 
ing as  a  separate  industry  is  now  but  little  carried  on  in  this  country.  .  .  .  Spun 
silk  is  a  very  large  industry,  and  our  spinners  make  the  finest  qualities  and  counts 
in  the  world,  and  their  products  are  extensively  used  in  the  lace  trade  of  Calais, 
St.  Etienne,  Lyons."  The  growth  of  the  spun  silk  industry  is  due  largely  to  the 
inventive  genius  of  Lister  (raised  to  the  peerage,  after  the  British  fashion  of  enoble- 
ment,  under  the  title  of  Lord  Masham).  The  firm,  Lister  &  Co.,  has  a  world-wide 
reputation;  it  turns  out  not  only  spun  silk  goods,  but  tapestries,  velvets,  pile 
fabrics,  for  which  much  reeled  silk  is  used.  It  not  only  perfected  spinning,  but 
made  a  patent  loom,  described  as  an  "  automatic  "  loom,  which  the  Germans  are 
said  to  have  copied  when  the  patent  ran  out.  Tariff  Commission  Report,  paragraph 
3319.  —  The  head  of  the  firm,  Lister,  also  took  a  leading  part  in  the  development  of 
the  British  worsted  manufacture;   see  below,  p.  339. 

Very  few  fabrics  are  made  entirely  of  spun  silk.  The  yarns  are  used  mainly  as 
cotton  is  used  in  silk  manufacturing,  —  for  admixture.  They  supply  the  pile  for 
cotton-back  pile  fabrics;  and  they  are  used  as  warp  or  as  weft  (filling)  with  reeled 
silk. 


242         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

evidence  gathered  by  the  Chamberlain  Tariff  Commission,  this 
loss  was  pointed  to  as  a  convincing  illustration  of  the  harm 
caused  by  the  free  trade  policy.  The  real  question,  however,  is 
whether  anything  was  lost  which  it  would  have  been  worth  while 
to  retain.  England  long  occupied,  in  relation  to  the  countries 
of  the  Continent,  a  position  similar  to  that  which  the  United 
States  has  occupied  in  relation  to  all  Europe.  She  was  the 
country  of  advanced  industry  and  of  general  economic  effective- 
ness, and  therefore  the  country  of  higher  wages.  Her  superiority 
is  not  so  marked  now  as  it  was  half  a  century  ago.  In  comparison 
with  some  countries,  notably  Germany,  it  seems  to  be  in  process 
of  ceasing;  but  certainly  it  persisted  through  the  greater  part  of 
the  period  here  under  review.  Silk  throwing  and  silk  weaving 
under  the  old  methods  were  not  industries  in  which  the  English 
excelled;  they  did  excel  in  other  industries;  and  labor  and  capital 
turned  to  the  others,  when  no  longer  kept  by  legislative  stimulus 
in  those  less  adapted  to  the  country's  genius.  Even  before  i860, 
the  older  branches  of  silk  manufacturing  were  declining.  Under 
free  trade,  they  went  by  the  board.  Part  of  the  labor  formerly 
occupied  in  them  was  turned  to  the  new  industry  which  has 
sprung  up,  notably  that  in  spun  silk  yarns,  —  an  industry  based 
on  the  traditional  excellencies  of  the  British:  specialization,  effec- 
tive use  of  good  machinery,  sterling  quality  in  the  product.  But 
probably  the  greater  part  went  not  to  those  remaining  specialties 
of  the  same  industry,  but  to  other  industries.  Thus  Coventry, 
formerly  a  center  for  silks  and  expecially  for  silk  ribbons,  is  now 
one  for  motors  and  bicycles,  and  is  more  prosperous  than  it  was 
under  the  old  regime.  There  has  been  not  the  net  loss  which  the 
protectionist  bemoans,  but  an  adjustment  to  new  conditions 
which  the  free  trader  may  reasonably  claim  to  be  advantageous. 

Turning  now  to  a  comparison  between  the  European  and  the 
American  silk  industries,  we  find  striking  resemblances  and  yet 
differences  equally  striking:  in  some  respects  a  similar  course  of 
development,  in  others  a  very  different  one. 

An  instructive  situation  is  to  be  found  in  the  manufacture 
of  sewing  silk.  This  is  the  one  branch  which  is  really  old  in  the 
United  States.     It  goes  back  to  the  first  half  of  the  nineteenth 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      243 

century.  The  transition  from  household  industry  to  machine 
and  factory  production  here  began  as  early  as  1829.  Successive 
improvements  in  machinery  were  made  from  time  to  time;  a  great 
impetus  came  in  the  middle  of  the  century  from  the  invention 
of  the  sewing  machine  and  the  consequent  demand  for  "  machine 
twist,"  i.  e.,  strands  adapted  for  use  on  the  sewing  machine.  By 
1850  and  i860  the  industry  had  reached  dimensions  large  for 
those  days.  It  continued  to  grow  steadily  in  the  modern  period, 
mainly  in  the  same  localities  and  even  in  the  same  establishments 
as  before  the  war.1 

The  exceptional  position  of  sewing  silk  almost  tells  its  own 
tale.  Here  is  a  machine  product,  peculiarly  adapted  to  Ameri- 
can methods  of  production  and  also  to  American  needs.  The 
machinery  for  turning  it  out  is  of  the  automatic  type;  the  mini- 
mum of  direct  labor  is  required;  mechanical  ingenuity  triumphs. 
This  sort  of  thing  the  American  can  do  better  than  any  one  else, 
and  he  goes  ahead  indifferent  to  tariff  support.  And  for  the 
same  reasons,  the  English  also  have  here  some  comparative 
advantage.  Sewing  silks  have  not  disappeared  from  England 
under  the  free  trade  regime.  Like  spun  silk,  they  hold  their 
own  easily  against  continental  competition. 

But  as  regards  reeled  silks,  —  which  remain  the  most  important 
of  the  silk  products,  —  the  resemblance  between  English  and 
American  conditions  ceases.  They  are  made  in  very  great  quanti- 
ties in  the  United  States;  they  are  very  little  made  in  England. 
They  have  been  protected  in  the  United  States,  and  left  quite 
without  tariff  support  in  England.  The  march  of  invention  and 
the  conquests  of  the  machine  have  been  noteworthy  in  the 
United  States,  and  in  Germany  also;   no  such  advances  in  this 

1  For  an  account  of  the  early  history  of  the  sewing  silk  manufacture,  see  Wyckoff , 
Silk  Manufacture  in  the  United  States  (1883),  pp.  32  seq.  See  also  the  book  of  1844 
on  Silk  Culture  in  the  United  States  (noted  above,  p.  223)  at  p.  9.  The  invention 
of  the  first  machines  began  as  early  as  1828.  The  Census  of  1850  reported  sewing 
silk  made  to  the  value  of  $1,209,000;  that  of  i860,  to  the  value  of  $3,600,000.  In 
the  Census  of  i860  (Report  on  Manufactures,  p.  xciv),  it  is  said  that  the  chief  seat 
of  the  industry  is  Connecticut,  "  where  sewing  silk  was  first  made  by  machinery 
upwards  of  twenty-five  years  ago."  An  acquaintance  whose  memory  goes  back 
to  ante-bellum  days  has  told  me  of  the  highly-developed  quasi-automatic  ma- 
chinery which  he  then  saw  in  operation  in  the  sewing  silk  mills. 


244         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

branch  of  the  industry  have  appeared  in  England.  We  have 
here  somewhat  different  questions  regarding  the  influence  of 
protection  or  free  trade,  and  the  causes  of  the  geographical  dis- 
tribution of  the  industry. 

The  branch  of  the  silk  manufacture  which  seems  to  have 
undergone  the  greatest  changes  and  shows  the  greatest  contrasts 
is  that  of  ribbon  making.  Vast  quantities  of  ribbons,  both  silk 
and  velvet,  are  made  from  start  to  finish  by  the  power-driven 
machine;  turned  out  in  mass  production  by  the  factories  of 
Crefeld  and  Paterson,  the  two  great  seats  of  the  industry  in  Ger- 
many and  the  United  States.  They  are  standardized  goods, 
made  for  a  very  wide  public;  often  composed  in  part  of  other 
materials  (especially  cotton);  not  articles  of  luxury,  except  so 
far  as  anything  used  for  adornment  may  be  so  regarded.  In 
Great  Britain,  on  the  other  hand,  the  ribbon  manufacture,  which 
played  a  considerable  part  in  Coventry  and  elsewhere  before  the 
French  treaty,  is  virtually  extinct.  Barring  a  few  specialties, 
silk  ribbons,  like  broad  silks,  are  secured  chiefly  by  impor- 
tation.1 

In  the  United  States,  again,  the  domestic  manufacture  of 
ribbons  has  almost  complete  command  of  the  market.  It  is  true 
that  imports  continue;  but  they  are  highly  specialized  imports. 
A  few  expensive  goods  of  unusual  patterns  are  alone  procured 
from  abroad.  They  come  in  partly  for  sale  to  the  rich  and 
fastidious,  partly  in  order  to  serve  as  models  for  American  manu- 
facturers, who  still  take  their  cue  from  the  French  in  matters  of 
fashion.  The  household  loom  (hand  or  electric  power),  or  a 
slow-moving  power  loom,  can  hold  its  own  in  making  such  goods, 
of  which  only  a  small  supply  can  be  marketed.  Machinery  can 
never  be  applied  to  advantage  unless  large  quantities  of  one 
particular  sort  of  article  are  to  be  produced.  But  the  great  mass 
of  standardized  ribbons,  —  by  no  means  necessarily  cheap  goods, 

1  In  the  Tariff  Commission  Report  (Chamberlain)  on  the  Silk  Industry,  there 
are  many  complaints  of  the  extinction  of  the  Coventry  ribbon  industry;  see  para- 
graphs 3239,  3392,  351 1.  "  Previous  to  the  French  treaty  there  were  about  seventy 
rich  manufacturers  in  the  ribbon  trade;  now  (1905)  there  are  six  very  poor  ones  " 
(paragraph  35 n).  "Ribbons  and  silks  are  practically  all  foreign-made  now" 
(paragraph  3471). 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      245 

but  goods  not  choice,  —  are  made  in  the  United  States  for  domes- 
tic sale.  Here  the  household  industry  has  no  place  whatever; 
and  such  of  its  special  products  as  continue  to  be  in  demand  are 
procured  by  importation. 

A  position  midway  between  that  of  France  and  that  of  the 
United  States  is  held  by  Germany  and  Switzerland.  Crefeld  is 
the  seat  of  a  well-developed  machine  industry.  Yet  in  the 
environs  of  Crefeld,  and  in  Elberfeld,  still  more  in  southern 
Germany,  there  is  much  household  weaving  of  silk  ribbons.  So, 
in  Switzerland,  the  great  ribbon  industry  of  Basel  is  partly  fac- 
tory, partly  household.1  In  these  two  countries,  both  household 
and  factory  industry  thus  exist  side  by  side.  In  part,  they  com- 
pete; the  victory  of  the  machine  is  not  so  assured  as  in  the 
United  States.  But  in  part  they  tend  to  turn  to  the  kinds  of 
product  to  which  they  are  severally  adapted.  Specialized  rib- 
bons, elaborated  patterns,  expensive  grades,  tend  to  be  made  on 
the  smaller  scale,  and  remain  within  the  domain  of  household  and 
handicraft  production.  Fabrics  for  wide  markets  and  mass 
consumption  are  made  in  the  factory. 

Velvet  ribbons  tell  a  similar  tale,  though  perhaps  with  a  differ- 
ence of  degree  in  favor  of  the  machine.  The  older  methods  of 
making  velvets  and  pile  fabrics  were  largely  displaced  in  the 
decade  1880-90,  by  inventions  which  seem  to  have  revolutionized 
this  branch  of  the  industry  with  great  rapidity.  Here  again  Cre- 
feld is  the  seat  of  a  highly  developed  industry,  using  much  cotton 
in  admixture  with  silk,  and  turning  out  cheaper  grades  of  goods  for 
sale  to  the  masses.  It  is  significant  that  spun  silk  ("  Schappe  ") 
is  largely  used,  both  in  the  United  States  and  in  Germany,  in  the 
manufacture  of  these  so-called  "  popular  "  fabrics.  The  ma- 
chinery was  early  transferred  to  the  United  States,  and  there 
seems  to  have  been  remodelled  and  improved.  In  both  countries 
the  steady  march  of  invention  has  enabled  a  wider  range  of 
goods  to  be  turned  out  by  machine  processes  than  was  at  first 
thought  possible, — figured  goods,  more  varied  patterns.  Yet 
in  both  it  is  the  standardized  articles  which  are  chiefly  turned 
out  by  the  machines.     In  the  United  States,  velvet  ribbons, 

1  Botzkes,  p.  26. 


246         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

like  silk  ribbons,  are  imported  only  when  of  special  quality  or 
design.1 

Essentially  the  same  situation  appears  with  broad  silks;  but 
here  apparently  with  less  decisive  conquest  by  the  machine,  and 
with  somewhat  greater  persistence  of  methods  and  products  of 
the  handicraft  type.  The  silks  of  half-a-century  ago,  made 
from  hand  thrown  tram'  or  organzine  on  hand  looms,  had  a  char- 
acter and  quality  of  their  own,  which  the  machine  made  ar- 
ticle cannot  fully  rival.  For  various  kinds  of  textiles,  —  woolens 
and  linens,  as  well  as  silks,  —  fabrics  of  a  certain  solidity  and 
durability  do  not  seem  within  the  competence  of  rapidly-driven 
machinery.  The  "  home-spun  "  goods  may  lack  the  sheen  and 
the  even  finish  of  the  factory  article,  but  their  very  uneven  quality 
gives  them  a  certain  charm.  And  they  "  wear  like  iron."  Such 
were  the  silks  of  older  days,  when  a  woman  kept  her  best  black 
dress  for  life.  A  piece  of  silk  such  as  is  woven  on  a  hand  loom 
in  France,  or  for  that  matter  a  Chinese  mandarin's  similarly 
woven  coat,  is  an  extraordinary  product.  No  wet  or  wear  harms 
it;  it  holds  its  sober  gloss  year  after  year,  even  decade  after 
decade.  Such  stuffs,  too,  have  a  certain  touch  and  appearance 
never  to  be  found  in  the  factory  article.  The  new  types  of 
factory-made  broad  silks  fit  in  many  ways  into  the  whims  of 
the  modern  woman  and  into  the  fast-changing  social  conditions. 
If  they  are  cheap,  they  are  dressy.     If  they  wear  out  in  a  brief 

1  On  pile  fabrics  in  general  (velvets,  plushes,  and  the  like),  I  have  found  it  diffi- 
cult to  get  satisfactory  information.  As  has  already  been  remarked,  these  were 
subjected  to  high  specific  duties  as  early  as  1890  (see  p.  218,  above,  and  my  Tariff 
History,  p.  269) ;  one  of  the  provisions  in  the  McKinley  tariff  which  is  said  to  have 
been  a  return  for  heavy  contributions  by  manufacturers  to  Republican  campaign 
funds.  A  considerable  industry  developed  in  the  United  States,  yet  imports  con- 
tinued on  a  large  scale.  Rapid  changes  in  fashion  here  introduce  a  peculiarly 
complicating  factor.  In  Europe,  the  English  have  the  lead  in  manufacturing 
plushes,  the  Germans  and  French  in  velvets.  In  both  classes,  and  especially  in 
velvets,  the  more  expensive  qualities  tend  to  be  imported  into  the  United  States. 
I  have  been  told  by  well  informed  and  apparently  unbiased  observers  that  the 
Americans  made  distinct  improvements  in  the  machinery  for  pile  fabrics.  What 
stage  in  the  rivalry  between  domestic  and  foreign  producers  has  been  reached  in  this 
industry  it  is  not  easy  to  make  out.  Nor  is  it  easy  to  find  indications  on  the  prob- 
lem more  particularly  considered  in  the  next  following  chapter,  —  the  prospects  of 
an  eventual  surpassing  of  the  foreigners  by  the  developing  American  industry. 


GROWTH  OF  AMERICAN  SILK  MANUFACTURE      247 

season,  so  do  the  current  fashions  of  color  and  design.  Being 
made  in  quantities  and  at  comparatively  low  cost,  they  can  be 
purveyed  to  a  large  constituency.  In  all  the  advanced  countries, 
and  especially  in  the  United  States,  the  steady  democratization 
of  society  has  caused  dress  silks  as  well  as  silk  ribbons  to  be  in 
wide  and  growing  demand,  —  a  circumstance  which  in  itself 
tends  to  give  victory  to  the  machine  made  product. 

Imports  of  broad  silks  into  the  United  States  continue;  but, 
as  in  the  case  of  ribbons,  for  specialized  fabrics  only.  France 
still  maintains  her  place  as  the  country  of  excellent  and  expensive 
silks.  Fabrics  of  high  quality  or  of  unusual  design,  such  as  are 
not  made  in  large  quantities  for  any  single  piece,  still  come  from 
the  looms  of  Lyons.  The  circumstance  that  dress  silks  give 
more  scope  for  individuality  and  variety  than  ribbons  enables 
the  foreigner,  and  especially  the  French  manufacturer,  to  hold 
his  own,  notwithstanding  high  duties,  in  supplying  the  American 
women  of  expensive  tastes  (no  small  constituency)  with  ornate  or 
"  distinctive  "  fabrics.  It  would  seem,  too,  that  broad  silks  are 
less  successfully  handled  by  the  machine  than  the  narrower  goods. 
One  reason  is  that  they  need  more  minute  inspection,  more  care- 
ful finishing;  and  these  ancillary  operations  always  involve  hand 
labor  and  minute  attention,  even  where  the  more  essential  work 
has  been  relegated  to  the  machine.  So  far  as  the  American  out- 
put and  the  continuing  imports  are  concerned,  the  situation  is 
again  the  same:  the  market  is  mainly  supplied  by  the  machine 
made  domestic  article,  and  only  special  qualities  are  imported, 
usually  of  the  kind  still  made  by  handicraft  or  quasi-handicraft 
methods. 

The  continuance  of  imports  for  still  other  kinds  of  silks  and 
the  different  relation  between  importation  and  domestic  produc- 
tion1 for  these  other  goods  are  explicable  on  the  same  principle. 
Silk  laces,  for  example,  are  chiefly  imported.     The  situation  is 

1  Some  figures  on  the  domestic  production  and  the  imports  of  silk  laces:  — 

Value  of  Product  Imports 

(Census) 

1880 $433,000 

1890 261,000 

1900 803,000        $3,000,000 

1905 74S.ooo         5,000,000 


248         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

the  reverse  of  that  just  described  for  ribbons  and  broad  silks: 
the  domestic  production  is  comparatively  small.  This,  too, 
notwithstanding  the  fact  that  the  duty  on  articles  of  this  class 
was  long  kept  unusually  high;  it  remained  60  per  cent  even  when 
the  ad  valorem  duty  on  most  silks  was  reduced  (in  1909)  to  50 
per  cent.  Silk  laces,  embroideries,  insertions  and  the  like  are 
made  by  hand,  or  on  hand  machines.  Some  simple  patterns  are 
indeed  made  within  the  country  under  the  stimulus  of  the  duty; 
but  the  tariff,  high  as  it  is,  has  no  effect  in  securing  the  domestic 
production  of  most  goods  of  this  class.  The  comparative  dis- 
advantage is  too  great.  A  similar  case  is  that  of  silk  trimmings. 
Dress  and  cloak  trimmings  are  mainly  imported.  They  are 
usually  made  in  small  quantities  and  of  patterns  much  varied; 
consequently  it  proves  not  worth  while  to  make  them  in  the 
United  States.  And  it  is  characteristic,  again,  that  certain  other 
kinds  of  silk  trimmings,  used  for  upholstery  purposes  and  the 
like,  are  made  at  home,  not  imported.  These  are  more  uniform 
in  pattern,  are  more  in  the  nature  of  standardized  articles,  give 
an  opportunity  for  machinery  and  for  operations  on  something 
approaching  large  scale :  they  afford  some  scope  for  the  American 
industrial  excellencies. 


CHAPTER  XVI 
THE  SILK  MANUFACTURE  —  SOME   CONCLUSIONS 

Summarizing  the  results  of  the  preceding  chapters,  we  may  say 
that  an  industry  quite  new  has  been  brought  into  being  by  pro- 
tection. Imports  of  great  classes  of  articles  have  been  sup- 
planted almost  wholly  by  domestic  products.  Not  only  this; 
the  domestic  industry  has  progressed  in  technical  effectiveness 
as  well.  Great  advances  have  been  made  in  its  appliances  and 
organization.  The  further  question  may  now  be  taken  up :  has 
the  progress  been  such  as  to  justify  the  protectionist  policy,  not 
merely  on  the  vulgar  mercantilist  grounds,  but  on  the  more  ten- 
able ground  that  a  young  industry  has  been  successfully  nur- 
tured ? 

In  seeking  to  answer  this  question  two  considerations  must 
be  borne  in  mind.  One  is  that  the  technical  progress  in  the  in- 
dustry may  not  have  been  peculiar  to  the  United  States.  It 
may  have  been,—  to  some  extent  beyond  doubt  it  was, —  but  one 
phase  of  a  general  advance,  observable  in  other  countries  as  well 
as  the  United  States.  So  far  as  the  American  manufacturers 
simply  adopted  those  changes  which  their  foreign  rivals  also  were 
making,  they  did  no  more  than  keep  abreast  of  the  times.  But 
to  forge  ahead  is  the  essential  desideratum  under  the  young 
industries  argument.  And,  second,  even  if  some  unusual  and 
unexampled  progress  was  made  in  the  American  industry,  we 
must  inquire  whether  it  was  carried  so  far  as  to  bring  the  industry 
up  to  the  full  American  standard,  —  whether  it  was  so  great  as 
to  enable  the  industry  eventually  to  hold  its  own  quite  without 
protection.  This  result  has  been  attained  in  the  iron  manu- 
facture; but  whether  as  the  consequence  of  protection  or  of  more 
general  causes,  we  have  found  it  difficult  to  determine.  If 
attained  at  all  in  the  silk  manufacture,  it  is  to  the  protective 
policy  that  the  result  must  be  fairly  credited.      Has  it  been 

249 


250         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

attained  to  the  full  ?  Quite  conceivably  the  technical  and  in- 
dustrial improvements,  though  excelling  those  in  other  countries, 
have  brought  the  industry  only  to  a  half-way  stage,  in  which 
it  has  risen  above  the  level  of  effectiveness  in  rival  countries,  yet 
not  quite  up  to  the  prevailing  and  dominant  level  of  effectiveness 
in  the  United  States.  It  may  have  reached  the  stage  where  it 
could  be  maintained  with  duties  lower  than  those  imposed  at 
the  outset,  yet  would  succumb  to  foreign  competition  if  there 
were  no  duties  at  all. 

Unfortunately  the  evidence  on  these  points  is  far  from  con- 
clusive; and  there  is  much  difficulty  in  weighing  such  pertinent 
evidence  as  is  available.  The  decisive  test  of  unaided  competi- 
tion with  foreign  rivals  has  not  been  applied ;  its  full  application 
at  any  early  date  in  the  future  is  beyond  the  bounds  of  political 
probability.  On  the  other  hand,  the  attitude  of  the  American 
manufacturers,  —  assumed  as  a  rule  without  consciousness  of  its 
economic  significance,  —  would  indicate  that  no  progress  what- 
ever had  been  achieved  and  that  the  free  traders'  goal  was  not 
in  sight.  Not  only  removal  of  the  duties,  but  the  slightest  re- 
duction, is  resisted  tooth  and  nail.  We  are  told  that  the  retention 
of  the  protective  barrier  at  its  original  height  is  indispensable 
for  the  very  existence  of  the  industry.  Every  endeavor  to  lower 
it  is  met  by  declarations  that  the  result  must  be  either  a  whole- 
sale reduction  of  operatives'  wages  or  complete  abandonment. 

Among  the  things  that  are  clear,  however,  is  the  exaggeration 
in  these  protests.  The  case  of  the  protectionists  is  not  so  bad 
as  their  own  spokesmen  make  it  out.  As  has  been  already 
pointed  out,1  opposition  of  this  sort  is  always  offered  when  reduc- 
tion of  protective  duties  is  suggested.  It  is  due  partly  to  a  wish 
to  take  no  chances,  —  to  "play  safe";  partly  to  mere  bluff, 
with  the  expectation  not  so  much  of  preventing  reduction  as  of 
minimizing  it;  partly  to  a  vague  panicky  feeling  about  the  terrors 
of  foreign  competition,  engendered  by  the  frothy  declamation 
on  cheap  foreign  labor.  These  same  manufacturers,  if  they  are 
questioned  in  quiet  and  give  answers  without  the  fear  of  the 
terrible  free  trader  on  them,  will  admit  that  they  are  not  averse 

1  See  chapter  ii,  above,  p.  23. 


THE  SILK  MANUFACTURE  —  SOME  CONCLUSIONS    25 1 

to  "  scientific  "  reductions;  that  many  duties  could  be  lowered 
without  harming  them;  that  some  articles  they  really  can  prob- 
ably produce  as  cheaply  as  the  foreigners,  at  least  under  the 
technical  conditions  existing  for  the  time  being  (they  will  usually 
make  reservations  as  regards  the  future);  and  that  they  simply 
do  not  know  just  how  far  the  process  of  reduction  or  removal 
could  be  carried  without  disturbance.  They  will  virtually  say, 
though  not  using  the  phraseology  of  the  economists,  that  there 
has  been  after  all  some  approach  to  the  free  traders'  goal. 

Looking  for  evidence  in  other  directions,  I  have  sought  to  find 
facts  of  significance  as  regards  technical  conditions,  and  have  also 
questioned  persons  presumably  well  informed,  yet  not  biased, 
concerning  the  general  conditions  of  the  competition  between 
domestic  and  foreign  producers.  The  results  so  secured  are  not 
without  haziness,  but  are  not  entirely  inconclusive. 

As  regards  technical  progress,  one  fact  of  significance  is  the 
source  of  supply  for  the  machinery.  Is  it  made  within  the  coun- 
try, or  is  it  imported  ?  Any  industry  which  steadily  imports  its 
machinery  from  other  countries  makes  thereby  a  confession  of 
the  lack  of  a  comparative  advantage.  Its  appliances  are  ipso 
facto  no  better  than  those  of  its  competitors.  Not  only  this, 
but  the  appliances  are  likely  to  be  less  effectively  utilized. 
Though  machinery  imported  from  elsewhere  may  be  operated 
as  skilfully  as  in  the  country  of  origin,  the  probability  is  the 
other  way.  The  same  ingenuity  and  watchfulness  that  cause  it 
to  be  devised  in  one  country  cause  it  also  to  be  worked  to  best 
advantage  there.  On  the  other  hand  any  industry  which  in  this 
regard  has  got  quite  beyond  foreign  tutelage,  —  for  which  the 
machinery  is  of  domestic  design  and  make,  —  can  claim  at  the 
least  full  equality.  And  if  the  machinery  is  not  only  made 
within  the  country,  but  is  sought  for  elsewhere,  being  exported 
to  other  countries  or  copied  there,  the  claim  may  be  for  more 
than  equality:  there  is  evidence  of  superiority.  Every  student 
of  economic  history  knows  that  such  a  position  of  superiority 
was  held  by  England  through  the  greater  part  of  the  nineteenth 
century.  Then  foreign  manufacturers,  and  especially  those  of 
the  Continent,  secured  their  machinery  from  England,  or  copied 


252         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

English  models.  Yet  they  were  very  slow  to  get  the  full  results 
from  the  British  machines;  and  as  fast  as  they  did,  the  British 
had  progressed  a  stage  further,  invented  or  improved  still  more, 
and  retained  their  superiority  indefinitely.  A  similar  position 
of  sustained  excellence  is  now  held  by  the  Americans  in  the 
machine  tool  trades,1  and  in  wood  working  apparatus.  How  is 
it  with  the  machinery  used  in  the  silk  manufacture  ? 

This  situation,  it  appears,  is  creditable  to  the  American  in- 
dustry, —  indicative  of  real  and  sustained  progress  and  at  least 
some  superiority.  As  has  been  noted,2  the  first  silk  working 
machinery  was  imported.  The  industry  began  by  following  the 
familiar  paths.  But  soon  it  struck  out  for  itself,  and  quite  left 
behind  the  old  exemplars.  For  a  decade  or  two,  all  the  more 
important  silk  machinery  has  been  made  within  the  country; 
only  certain  specialties,  presently  to  be  described,  have  been  im- 
ported. This  cessation  of  imports  of  machinery  cannot  be 
ascribed  merely  to  the  fact  that  duties  on  the  machinery  itself 
have  been  high.  True,  protection  has  been  applied  here  also; 
but  by  no  means  with  the  result  of  keeping  out  all  machinery  of 
every  sort.  In  other  textile  industries,  and  especially  in  the 
worsted  manufacture,  much  of  the  machinery  continues  to  be 
imported  notwithstanding  the  duties.3  The  fact  that  it  is  other- 
wise for  the  silk  industry,  —  that  most  of  the  equipment  of  the 
American  mills  is  of  domestic  design  and  construction,  —  is  signif- 
icant. Still  more  significant  is  the  exportation  of  such  equip- 
ment* or,  if  not  exportation,  the  copying  of  American  models  in 
foreign  countries.  Throwing  machinery  was  invented  in  the 
United  States,  following  the  principle  of  cotton  spinning  machin- 

1  See  chapter  xiii,  p.  197,  above. 

2  See  chapter  xiv,  p.  230.  A  Coventry  (England)  manufacturer  said  in  1905 
that  in  1870-80  "  a  great  number  of  looms  and  other  machinery  were  sent  to 
America,  and  at  Paterson  (N.  J.)  there  are  in  full  operation  the  very  same  kinds  of 
looms  and  other  machinery  as  were  used  in  Coventry  thirty  and  sixty  years  ago." 
Tariff  Commission  Report,  paragraphs  3275,  3391.  It  is  quite  true,  I  am  told,  that 
some  old  English  looms,  solidly  built,  continued  to  be  used  thus  long,  even  though 
it  would  have  paid  to  substitute  new  and  more  efficient  looms.  The  ribbon  looms 
in  use  at  Coventry  in  i860  seem  to  have  been  made  in  Basel  and  exported  thence 
to  England.     Timmins,  The  Resources  .  .  .  of  Birmingham  (London,  1866),  p.  187. 

3  Cf.  what  is  said  below,  chapter  xxi,  p.  343,  on  woolen  and  worsted  machinery. 


THE  SILK  MANUFACTURE  — SOME  CONCLUSIONS    253 

ery  for  which  also  American  ingenuity  had  taken  the  initiative.1 
It  was  developed  to  a  high  degree  of  perfection,  and  American 
throwing  machines  were  sent  to  foreign  countries,  and  introduced 
into  the  technical  schools  of  England  and  Switzerland.2  Ribbon 
weaving  machinery,  already  mentioned  among  those  improved  by 
Americans,  was  brought  to  a  high  pitch  of  automatic  operation. 
It  too  was  exported,  or  manufactured  in  European  countries  after 
American  designs.3  So  it  was  with  broad  looms.  For  all  the 
textiles,  weaving  machinery  has  been  a  peculiarly  fertile  field  for 
American  invention.  Looms  for  broad  goods  as  well  as  for 
ribbons  have  been  brought  to  an  exceptional  pitch  of  mechanical 
effectiveness.  All  thought  of  importing  silk  looms  has  ceased; 
and  broad  looms,  like  ribbon  looms,  have  been  exported,  or  manu- 
factured abroad  after  American  models.  They  have  moreover 
been  operated  to  best  effect  within  the  country.  The  example 
of  the  cotton  and  worsted  industries  has  been  followed:  the 
weaver  (in  reality  a  loom  tender  and  watcher)  has  been  called 
on  to  take  care  of  several  looms,  and  usually  of  more  looms  than 
are  allotted  to  the  weaver  of  similar  fabrics  in  European  countries. 

1  The  throwing  machine  ("  spindle  ")  was  an  adaptation  of  the  ring  spindle 
which  has  played  so  important  a  part  in  the  American  cotton  manufacture.  "  A 
little  after  Rabbeth's  invention  [of  a  much-improved  ring  spindle  for  cotton]  Mr. 
John  E.  Atwood  of  Stonington,  Conn.,  made  a  sleeve  whorl  spindle  in  which  the 
bolster  and  step  were  made  in  one  piece,  and  attached  '  in  a  yielding  manner  '  to 
the  surrounding  shell  or  bolster  case.  This  structure  has  gone  into  use  to  an  extent 
of  hundreds  of  thousands  in  silk  spinning,  but  not  extensively  in  cotton  spinning. 
...  In  silk  spinning  .  .  .  the  process  is  entirely  different  from  that  necessary  in 
spinning  cotton.  The  silk  is  spun  off  the  spindle  and  the  cotton  is  wound  upon  it." 
See  the  historical  account  of  cotton  spindles  given  by  W.  F.  Draper,  in  Proceedings, 
Twenty-sixth  Anniversary  Meeting  New  England  Cotton  Manufacturers  Associa- 
tion, p.  31. 

2  Allen,  Silk  Industry  of  the  World,  p.  27.  The  leading  American  firm  that 
manufactures  this  machinery  writes  me:  "  For  a  number  of  years  we  have  been 
exporting  throwing  machinery  to  various  silk  producing  European  and  Asiatic 
countries.  It  seems  to  be  a  constant  trade,  although  not  large,  but  is  gradually 
extending  into  different  fields  of  silk  manufacturing." 

3  For  reference  to  the  high-speed  automatic  ribbon  loom,  invented  in  the  United 
States  in  1899,  see  Allen,  Silk  Industry,  p.  29,  and  Census  Report  on  Manufactures, 
1900,  p.  209.  A  large  American  firm  making  ribbon  looms  writes  to  me  thus  (1913) : 
"  For  a  number  of  years  we  exported  our  ribbon  looms  to  Europe  —  to  Switzerland, 
France,  and  Germany  —  but  we  are  now  represented  in  Europe  by  a  large  manu- 
facturing concern  who  build  our  machinery  over  there  from  our  models." 


254         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

Both  in  construction  and  in  operation  there  is  evidence  of  superi- 
ority, —  of  a  comparative  advantage.1 

It  is  not  inconsistent  with  this  conclusion  that  certain  kinds  of 
machinery  are  still  imported.  On  the  contrary,  the  continuing 
partial  reliance  on  foreign  makers  proves  on  careful  scrutiny 
to  be  not  inconsistent  with  a  general  trend  to  progress  and 
emancipation.  The  machinery  that  continues  to  be  imported  is 
chiefly  for  finishing  purposes.  The  rapid  changes  in  fashion 
bring  corresponding  changes  in  these  devices.  An  apparatus 
will  be  contrived  to  secure  a  particular  appearance  in  the  fabrics; 
in  a  season  or  two  something  else  comes  into  fashion;  then  a 
new  kind  of  apparatus  comes  into  use.  American  manufacturers 
of  machinery  do  not  find  it  worth  while  to  cater  to  such  tempo- 
rary and  sporadic  demands.  It  is  a  case  of  "  specialties  ";  and 
these  tend  to  be  imported,  whether  they  are  tools  or  finished 

1  On  broad  looms,  the  spokesman  of  the  industry  wrote  thus  in  1900  (Allen,  Silk 
Industry,  p.  27):  "In  weaving  perhaps  there  has  been  more  progress  in  improved 
machinery  the  last  decade  than  in  the  three  preceding  decades.  The  improve- 
ments have  produced  a  loom  of  very  high  efficiency,  equipped  with  mechanical 
devices  designed  for  saving  time,  labor,  material,  such  as  numerous  multipliers, 
two  weave,  leno,  swivel,  embroidery  motions,  and  many  others,  all  arranged  to 
work  automatically.  Special  mention  should  be  made  of  the  improvements  by 
which  all  classes  of  taffeta  effects,  formerly  made  on  hand  looms  only,  are  now  made 
on  power  looms  "  (the  italics  are  mine;   the  passage  deserves  emphasis). 

Here  again  I  can  refer  to  correspondence  (19 13)  with  a  great  loom  making  firm. 
"  We  commenced  exporting  silk  looms  many  years  ago  and  as  soon  as  they  became 
established  in  some  of  the  foreign  countries  they  were  copied  and  are  being  made 
there  today,  exact  copies  of  our  machine.  The  labor  cost  is  so  much  less  there 
that  it  is  impossible  for  us  to  continue  to  export,  although  we  have  sent  from  time 
to  time  quite  a  lot  of  machinery  into  the  different  countries,  but  as  above  stated,  as 
soon  as  they  get  well  established  they  get  a  local  maker  to  manufacture.  .  .  . 
Were  it  not  for  the  fact  that  we  have  been  able,  by  an  enormous  expenditure  of 
money  and  skill  to  invent  improved  machinery,  we  should  never  have  been  able 
to  take  the  position  we  have  amongst  the  silk  manufacturers  of  this  country."  It 
should  be  added  that  this  firm,  like  most  makers  of  machinery,  expressed  its  objec- 
tions to  "  any  appreciable  change  "  in  the  tariff  as  it  stood  in  191 2. 

Another  manufacturer  (one  making  silk  fabrics,  not  machinery)  writes  me  that 
"  in  the  knitting  industry,  —  silk  underwear,  hosiery,  neckties,  —  the  American 
machinery  is  vastly  superior  to  the  foreign  machinery,  against  which  there  is  still 
a  considerable  prejudice  abroad.  This  prejudice  will  undoubtedly  be  broken  down 
within  another  decade."  Here  is  again  the  assertion  of  superiority,  and  again  the 
fear  that  it  will  not  be  maintained.  Cf.  the  same  state  of  mind  among  the  makers 
of  other  machinery,  chapter  xii,  p.  196,  above. 


THE  SILK  MANUFACTURE  — SOME  CONCLUSIONS    255 

products.      Such  finishing  machinery  as  is  continuously  used, 
year  after  year,  is  commonly  of  American  make.1 

Turn  now  to  another  kind  of  evidence.  Repeatedly  I  have 
asked  persons  who  buy  and  sell  silks,2  what  would  happen  if 
there  were  no  duties  ?  Are  there  any  goods  which  are  so  cheaply 
made  in  the  United  States  that  they  would  in  no  event  be  im- 
ported ?  And  as  regards  those  which  might  be  imported  under 
free  trade,  how  great  is  the  present  difference  in  price  between 
the  European  goods  and  the  American  ?  Here,  unfortunately, 
our  prohibitive  duties  so  veil  the  situation  that  it  is  difficult  to 
secure  satisfactory  information.  The  question,  are  any  silks  as 
cheap  in  the  United  States  as  abroad,  is  usually  answered  un- 
hesitatingly: yes,  most  domestic  goods  are  cheaper  than  the 
imported.  But  a  very  little  further  inquiry  shows  the  answer 
to  mean  that  domestic  goods  are  cheaper  than  duty-paid  foreign 
goods.  And  when  the  question  is  again  asked,  with  careful 
explanation  of  its  precise  bearing;  how  if  the  foreign  goods  were 
admitted  free  of  duty  ?  —  the  person  in  the  business  hesitates. 
This  question  he  is  not  called  on  to  consider  in  the  ordinary 
course  of  his  dealings.  The  purchase  of  most  foreign  goods,  with 
the  duty  added,  is  quite  out  of  the  question  and  the  dealer  pays 
no  attention  to  them  or  their  prices.  Certain  classes  of  articles, 
and  some  specialties,  are  indeed  so  much  cheaper  abroad  that 
they  can  be  imported,  even  with  payment  of  the  duties;  and 
reference  is  then  made  to  the  imported  silks  described  in  the  pre- 

1  A  conversant  American  dealer  writes  me:  "  In  the  finishing  departments  .  .  . 
a  good  deal  of  machinery  is  imported.  This  is  largely  due  to  the  fact  that  new- 
fabrics  are  brought  out  abroad,  many  of  which  require  special  apparatus  to  produce 
the  desired  results  in  the  finishing,  and  it  takes  some  time  before  the  American 
producer  of  finishing  machinery  begins  to  manufacture  such  apparatus.  This 
machinery  may  be  of  such  limited  usefulness  that  its  manufacture  is  never  taken 
up  here  at  all,  and  at  other  times  the  usefulness  of  such  machinery  may  be  transi- 
tory. The  ordinary  run  of  finishing  machinery,  such  as  spraying  machines,  paper 
dryers,  can  dryers,  tentering  frames,  calenders,  singeing  machinery  ...  are  largely 
made  on  this  side  of  the  water,  and  there  must  be  few  of  such  machines  now  (1913) 
imported."     An  importer  of  finishing  machinery  confirms  these  statements. 

2  These  inquiries  have  been  addressed  chiefly  to  jobbers  and  to  the  managers  of 
silk  departments  in  the  large  retail  establishments.  Both  manufacturers  and  im- 
porters are  likely  to  be  biased,  even  though  not  consciously;  the  importers  are 
often  the  representatives  of  foreign  manufacturers. 


256         SOME  ASPECTS  OF  THE   TARIFF  QUESTION 

ceding  chapter.  But  how  much  cheaper  are  the  foreign  goods 
which  are  never  imported  ?  are  these  cheaper  at  all  ?  One  witness 
who  impressed  me  as  well-informed  and  judicious  stated  his 
belief  that  ribbons  and  broad  silks  are,  as  a  rule,  somewhat 
cheaper  abroad;  perhaps  25  per  cent  cheaper;  yet  as  regards 
most  goods  admitted  this  to  be  but  a  guess.  Some  goods,  he 
said,  are  certainly  quite  as  cheap  in  the  United  States;  such  as 
spun  silks  and  certain  smooth-faced  satins.  And  it  is  significant 
that  another  well-informed  observer  has  publicly  expressed  the 
opinion  that  certain  standard  silk  fabrics  are  so  cheaply  made 
that  an  export  trade  in  them  is  among  the  possibilities  of  the 
early  future.1 

The  fact  that  the  makeup  of  the  American  purchasing  constit- 
uency is  different  from  that  of  foreign  countries  adds  to  the 

1  "  Where  labor  enters  most  largely,  we  are  visibly  outclassed.  .  .  .  With  plain 
goods,  made  on  a  large  scale,  the  unit  of  labor  cost  is  much  decreased.  Where  a 
mill  is  running  many  hundreds  of  looms  on  the  same  fabric,  three  or  four  looms  to  a 
weaver,  and  at  high  speeds,  both  the  weaving  cost  and  the  general  expense  item 
fall  to  a  really  low  figure,  and  it  is  in  these  directions  we  must  look  [for  possible 
exports]. 

"  There  are  many  fabrics  such  as  liberty  satins,  cotton  back  satins,  crepes  de 
chine,  taffetas,  etc.,  that  have  been  so  specialized  on  here  as  to  encourage  the  belief 
that  their  cost  is  so  low  that  an  export  business  might  be  done  in  them."  From  a 
chapter  on  "  Finding  Foreign  Markets  "  in  Chittick,  Silk  Manufacturing  and  its 
Problems  (1913),  p.  324. 

The  exports  of  silks,  as  recorded  in  the  Treasury  statistics,  were  as  follows:  — 

Exports  of  Silk  Manufactures 


To 
Great  Britain 

To 

Canada 

Total, 
to  all  countries 

1909 

$13,000 

$503,000 

$847,000 

1910 

50,000 

722,000 

1,097,000 

1911 

200,000 

915,000 

1,538,000 

1912 

210,000 

1,159,000 

l,g93,ooo 

1913 

200,000 

1,354,000 

2,391,000 

The  only  countries  besides  Great  Britain  and  Canada  to  which  any  considerable 
quantities  went,  were  Cuba  and  Mexico.  The  exports  to  Great  Britain  were  chiefly 
of  knitted  silks,  for  which  some  newly-devised  American  machinery  had  caused  a 
considerable  foreign  market  (cf.  p.  254,  above).  Those  to  Canada  have  been 
explained  to  me  as  due  largely  to  mere  propinquity;  a  Canadian  merchant  whose 
stock  is  depleted  can  send  a  buyer  to  New  York  and  get  what  he  wants  over  night, 
disregarding  for  such  sporadic  purchases  a  comparatively  high  price.  With  all 
allowance  for  these  exceptional  circumstances  the  recent  increase  in  exports  of  silks 
remains  striking  and  apparently  significant. 


THE  SILK  MANUFACTURE  — SOME  CONCLUSIONS    2$? 

difficulties  in  comparing  domestic  silks  with  the  imported.  A 
merchant  who  had  been  lifelong  in  the  trade  remarked  to  me  that 
it  was  almost  impossible  to  compare  American  ribbons  with  for- 
eign. The  former,  of  the  kind  made  "  for  our  general  trade," 
are  of  good  quality;  better  than  what  is  made  for  mass  con- 
sumption in  Europe,  though  not  so  choice  as  what  is  there  made 
for  the  rich  and  is  still  exported  to  the  United  States  for  our  own 
rich.  The  different  conditions  of  the  American  market,  —  an 
enormous  number  of  purchasers  who  are  well-to-do,  even  though 
not  affluent,  and  who  buy  a  staple  article  of  good  quality,  —  has 
caused  the  American  manufacturers  to  turn  out  great  quantities 
of  ribbons  that  are  not  expensive,  yet  not  vilely  cheap.  These 
are  made  on  very  large  looms,  twenty  or  twenty-five  feet  wide,1 
which  are  run  faster  than  are  looms  in  European  countries,  and 
enable  a  great  yardage  to  be  turned  out  at  low  cost  per  piece. 
All  the  witnesses  unite  in  remarking  on  the  great  improvements 
in  American  silk  goods  during  the  last  twenty  years,  the  better- 
ment of  the  quality  and  taste,  the  greater  variety  of  goods,  the 
steady  lowering  of  prices. 

On  the  whole,  the  conclusion  seems  warranted  that  there  has 
been  at  least  some  approach  to  a  successful  application  of  pro- 
tection to  young  industries.  How  near  the  approach  is  to  com- 
plete success,  how  good  the  prospects  for  such  success,  would 
be  difficult  to  say.  But  it  seems  beyond  question  that  great 
advances  have  been  made  in  the  domestic  industry,  and  that 
both  in  its  technical  appliances  and  in  the  adaptation  of  its 
products  to  the  demands  of  the  domestic  market  the  characteristic 
American  excellencies  have  been  shown.  The  peculiarities  of 
the  raw  material  and  the  long-standing  traditions  of  the  industry 
interposed  at  the  outset  obstacles  which  would  almost  certainly 
have  prevented  ventures  into  this  new  field  but  for  the  stimulus 
from  protection.  Competition  among  the  domestic  producers 
stimulated  invention,  lowered  prices,  displaced  the  foreigners  in 
the  most  important  classes  of  goods,  made  the  burden  of  the 

1  The  ordinary  "  double  deck  "  loom  for  ribbons  is  about  16  feet  wide.  These 
wide  looms  are  "  single  deck."  The  modern  ribbon  loom  weaves  a  great  number  of 
ribbons  side  by  side  in  long  parallel  strips. 


258         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

duties  (so  far  as  a  burden  remained  at  all)  much  less  than  the 
nominal  rates  indicated.1 

This  general  conclusion  is  not  weakened  by  a  comparison  with 
the  course  of  development  in  other  countries.  The  contrast  both 
with  England  and  with  Germany  and  Switzerland  is  instructive. 
The  older  type  of  silk  manufacture  succumbed  in  England  under 
free  trade.  It  was  no  better  adapted  to  the  industrial  conditions 
of  England  than  of  the  United  States;  it  did  not  offer  the  same 
advantages  as  other  English  industries;  its  disappearance  cannot 
be  reasonably  a  matter  for  regret.  A  new  silk  industry  has  in- 
deed arisen  in  England,  self-supporting,  and  profitable  alike  to 
the  owners  and  to  the  country.  But  it  is  modest  in  size,  limited 
in  scope,  not  comparable  to  the  young  American  giant.  Who 
can  say  whether  a  similar  great  industry  would  have  developed 
in  Great  Britain  under  high  protection  ?  Whether  innovation, 
invention,  rapid  change  and  improvement,  would  have  been 
stimulated  such  as  to  produce  even  that  success,  ■ —  still  with  an 
uncertain  ultimate  outcome,  —  which  has  been  achieved  in  the 
United  States  ?  Bearing  in  mind  the  general  character  of  British 
industries,  their  tenacious  adherence  to  ways  well-approved,  their 
sustained  excellence  in  the  goods  of  established  position,  one  is 
led  to  question  whether  any  prospect  existed  of  eventual  gains 
under  protection.  The  British  have  doubtless  done  their  best 
under  free  trade.  On  the  other  hand,  the  Germans  (and  appar- 
ently the  Swiss  also)  have  shown  in  the  silk  industry,  as  else- 
where, a  curious  juxtaposition  of  the  old  industrial  regime  and 
the  new.  The  machine  has  conquered  larger  and  larger  sections 
of  the  field;  yet  not  to  the  complete  displacement  of  the  handi- 
craft and  the  household.  The  quantitative  growth  of  the  Ger- 
man silk  manufacture  has  been  comparable  to  that  in  the  United 

1  Notwithstanding  occasional  suggestions  that  American  silk  manufacturers 
should  in  some  way  combine,  and  cease  their  "  senseless  "  competition,  nothing 
in  the  nature  of  a  trust  or  combination  has  appeared  in  the  industry.  In  the 
Thirty-ninth  Report  of  the  Silk  Association,  p.  46,  are  some  expressions  of  vain  long- 
ing for  a  curtailment  of  competition.  In  Germany,  the  Kartel  has  become,  in  the 
silk  manufacure  as  in  others,  a  permanent  part  of  industrial  organization;  yet,  it 
would  seem,  mainly  as  a  "  condition  "  Kartel,  not  one  effective  in  raising  prices. 
Beckerath,  Kar telle  der  Seidenweberei-industrie,  p.  187  el  passim. 


THE  SILK  MANUFACTURE  — SOME  CONCLUSIONS    259 

States;  the  qualitative  advance  also  has  been  striking.  Here 
also  it  would  be  difficult  to  say  how  far  the  protective  policy  has 
contributed  to  the  growth  and  how  far  that  policy  can  be  justified 
on  the  ground  of  having  nurtured  the  industry  to  independence. 
The  case  would  seem  less  strong  in  Germany  than  in  the  United 
States.  The  German  industry  has  old  roots;  the  application  of 
protection  was  less  vigorous  and  stimulating;  the  machine  has 
had  no  such  sweeping  victory.  Yet  the  problem  is  part  of  the 
larger  problem  how  to  explain  the  extraordinary  industrial  burst 
which  is  transforming  the  German  people.  Great  political  and 
social  forces  have  been  at  work.  The  unbiased  historian,  when 
he  comes  in  later  times  to  survey  with  the  needed  perspective  this 
marvellous  change,  will  probably  conclude  that  the  external  com- 
mercial policy  of  the  nation  was  among  the  least  of  the  impelling 
causes.  A  conclusion  in  general  similar  is  likely  to  be  reached 
for  the  United  States.  Here  also  the  share  of  protection  in 
causing  or  even  modifying  the  country's  general  industrial  ad- 
vance will  be  found  much  less  than  the  vehemence  of  the  present 
controversy  would  imply.  But  in  the  particular  case  we  are  here 
considering,  —  the  American  silk  manufacture,  —  a  dominant 
influence  from  the  protective  system  is  not  to  be  gainsaid;  nor 
can  it  be  denied  that  this  influence  has  shown  more  poten- 
tiality of  eventual  benefit  than  the  free  traders  are  disposed  to 
admit. 

Our  survey  of  the  silk  industry  thus  raises  more  questions  than 
it  answers.  It  appears  that  protection  has  caused  a  great  in- 
dustry to  spring  up;  and  there  are  tenable  grounds  for  maintain- 
ing that  the  growth  has  been  qualitative  as  well  as  quantitative, 
and  may  illustrate  the  validity  of  the  argument  for  protection  to 
young  industries.  But  the  protection  has  been  so  high  and  so 
long-continued  that  it  conceals  from  view  many  facts  of  essential 
significance.  We  cannot  be  sure  how  great  has  been  the  progress 
of  the  American  silk  manufacture.  An  incisive  reduction  of 
duties,  —  much  sharper  than  that  made  in  the  tariff  act  of  19 13,  — 
would  show  whether  its  progress  toward  independence  has  really 
been  as  considerable  and  as  promising  as  it  has  been  inferred  to 


260        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

be,  from  evidence  more  or  less  inconclusive,  in  the  preceding 
pages.  A  complete  abolition  of  duties,  like  that  which  England 
made  in  i860,  would  alone  show  whether  the  eventual  end  of 
protection  to  young  industries  has  been  reached,  —  complete 
independence,  ability  to  supply  the  commodities  as  cheaply  as 
by  importation. 


j 

I 

i 


at: 


CHAPTER  XVII 

THE  COTTON  MANUFACTURE.    PROGRESS  OF  THE 
DOMESTIC  INDUSTRY 

The  cotton  manufacture  has  a  history  very  different  in  some 
important  respects  from  that  of  the  silk  manufacture.  It  is  not 
a  young  industry,  but  an  old  one.  In  the  United  States,  as  in 
England,  it  was  the  earliest  of  the  textile  industries  to  be  reorgan- 
ized for  power-driven  machinery,  and  for  the  modern  factory 
system;  the  earliest,  indeed,  among  manufactures  of  any  kind. 
The  epoch-making  change  was  promoted  in  this  case,  by  the  even 
and  homogeneous  quality  of  the  raw  material,  as  well  as  by  its 
abundant  supply.  Cotton  was  subjected  with  comparative  ease 
to  the  machine  processes.  The  same  causes  which  made  the  in- 
dustry the  first  one  and  the  typical  one  to  be  affected  by  the 
English  industrial  revolution,  facilitated  its  early  growth  in  the 
United  States.  Being  preeminently  a  machine  using  industry, 
it  was  promptly  taken  up  and  successfully  prosecuted  by  the 
Americans,  and  especially  by  the  New  Englanders. 

The  cotton  manufacture  grew  up,  —  to  recapitulate  sum- 
marily, —  during  the  period  of  interrupted  foreign  trade  which 
preceded  the  war  of  1812  and  continued  through  the  war  until 
181 5.  It  was  systematically  and  successfully  developed  during 
the  time  of  the  early  protective  movement  which  set  in  with  the 
tariff  of  1816;  it  maintained  itself  imshaken  notwithstanding  the 
gradual  reduction  of  duties  carried  out  in  1833-40  under  the  pro- 
visions of  the  compromise  tariff  act  of  1833.  A  marked  advance 
took  place  in  the  decade  1840-50,  perhaps  stimulated  by  the 
higher  duties  of  the  tariff  act  of  1842,  but  at  all  events  not 
checked  by  the  lower  duties  of  the  act  of  1846.  P'rom  1846  to 
1857  cotton  goods  were  subjected  to  a  simple  ad  valorem  duty  of 
25  per  cent,  and  from  1857  to  1861  to  one  of  but  24  per  cent. 
The  industry  progressed  rapidly  and  grew  to  large  dimensions 
during  this  period  of  moderate  duties.     Not  only  did  it  grow  at 

261 


262         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

home,  but  it  reached  out  to  foreign  markets.  A  considerable 
export  trade  developed,  —  conclusive  proof,  if  not  of  complete 
independence  from  protection  in  every  branch,  at  least  of  a  stage 
of  development  to  which  the  young  industries  argument  could  no 
longer  apply.1 

Nevertheless  the  further  growth  of  the  industry  since  the  civil 
war  suggests  some  questions  which  are  related  to  the  arguments 
for  protection  to  young  industries,  and  some  other  questions 
which  bear  on  the  more  general  problems  of  the  international 
division  of  labor.  To  these  attention  will  be  given  in  this  present 
chapter. 

The  rates  of  duty  on  cotton  goods  since  i860  tell  a  somewhat 
curious  story.  In  the  tariff  act  of  1861,  enacted  before  the  war, 
specific  duties  were  substituted  for  the  ad  valorem  duties  of  1846 
and  1857;  with  the  declared  intention,  and  in  the  main  probably 
with  the  effect,  of  simply  changing  the  method  of  levy,  not  the 
height  of  the  tariff.2  But  the  change  to  the  specific  system  soon 
led  to  unexpected  consequences.  During  the  war,  the  price  of 
raw  cotton  went  up  to  extraordinary  figures.  The  average  price 
for  1864  was  over  fifty  cents  a  pound  in  gold;  and  for  more  than 
ten  years  after  the  war  it  continued  to  be  at  a  high  level.  Not 
until  the  close  of  the  decade  1870-80  did  it  fall  to  something 
like  the  normal  figures  (ten  to  twelve  cents  a  pound)  that  had 
prevailed  before  i860.  The  prices  of  cotton  goods  went  up  corre- 
spondingly, the  rise  being,  of  course,  most  marked  in  the  heavier 

1  For  an  account  of  this  earlier  period  in  somewhat  more  detail,  I  refer  the  reader 
to  my  Tariff  History  of  the  United  States,  pp.  25-36,  135-142,  and  to  M.  T.  Cope- 
land,  The  Cotton  Manufacturing  Industry  of  the  United  States,  chapter  i.  I  shall 
have  frequent  occasion  to  refer  to  Dr.  Copeland's  able  volume,  which  makes  it 
unnecessary  to  consider  in  detail  some  important  matters  on  which  he  has  told  the 
whole  story. 

In  my  Tariff  History,  p.  34  and  elsewhere,  I  have  stated,  with  less  qualification 
than  I  should  now  make,  the  conclusion  that  the  duties  of  1816  were  not  clearly 
needed  for  protection  to  the  then  young  industry.  As  intimated  in  chapter  ii 
of  the  present  volume  (see  p.  22),  I  am  disposed  to  allow  a  longer  time  for  the  trial 
of  protection  to  young  industries,  and  to  admit  the  probable  usefulness  not  only  of 
the  imposition  of  duties  in  1816,  but  of  their  retention  in  1824,  1828,  and  1832. 

2  Such  was  the  opinion,  for  example,  of  Samuel  Batchelder,  the  well-known 
manufacturer  and  chronicler,  expressed  in  letters  written  to  the  Boston  Commercial 
Advertiser  in  1861. 


THE  COTTON  MANUFACTURE  263 

and  cheaper  goods  for  which  the  raw  material  was  the  largest 
item  in  the  expenses  of  production.  Naturally  the  specific  duties 
were  raised  correspondingly.  As  the  prices  of  cotton  and  cotton 
goods  had  gone  up  five-fold,  so  the  duties  on  the  goods  went  up 
in  a  similar  ratio.  On  the  cheapest  grade  of  unbleached  cloth, 
for  example,  the  rate  in  1861  had  been  one  cent  per  yard;  it  be- 
came five  cents  per  yard  in  1864. 

The  price  of  cotton  began  to  decline  as  soon  as  the  war  closed; 
within  a  year  or  two  it  declined  greatly.  The  duties  on  cotton 
goods  as  raised  in  1864  became  proportionately  heavier.  Even 
the  rates  fixed  in  186 1  had  been  prohibitory  on  the  cheap  goods; 
those  of  1864  became  very  heavy,  often  prohibitory,  on  goods  of 
medium  and  finer  grades.  A  reduction  was  to  have  been  expected ; 
but  it  was  long  postponed,  and  when  finally  made,  still  left  a  high 
range  of  rates.  Such  was  the  case,  as  is  well-known  to  all  stu- 
dents of  our  tariff  history,  with  all  the  protective  duties  of  the 
war  period :  it  was  their  prolonged  retention,  largely  through  in- 
ertia, that  caused  the  protective  system  to  become  so  extreme. 
In  the  case  of  cottons,  the  duties,  raised  to  an  especially  high 
pitch  in  1864,  were  not  overhauled  systematically  until  the  gen- 
eral revision  of  1883.  Even  then  they  were  reduced  to  figures 
that  left  them  prohibitory  for  all  the  cheaper  grades  of  goods. 
The  duty  on  the  lowest  class  was  left  at  two  and  one-half  cents  a 
yard,  amply  sufficient  to  shut  out  any  possibility  of  importa- 
tion; and  those  on  most  other  grades  remained  correspondingly 
high.  In  the  protective  tariff  acts  that  came  after  1883,  —  those 
of  1890,  1897,  and  1909,  —  the  same  process  of  cautious  reduc- 
tion of  the  duties  on  the  cheaper  grades  was  continued.  By  1897 
the  duty  on  the  lowest  class  had  gone  down  to  one  cent  a  yard, 
precisely  the  figure  of  1861.  This  was  still  a  "  safe  "  rate.  So 
were  the  corresponding  rates  on  the  lower  grades  generally,  — 
on  yarns  of  the  coarser  counts,  and  on  the  cheap  and  medium 
grades  of  woven  fabrics,  whether  in  the  gray,  or  bleached,  or 
printed  and  dyed. 

Meanwhile,  as  the  protective  system  was  extended  and  stiffened, 
another  movement  appeared.  The  specific  duties  were  differen- 
tiated more  and  more;  and  side  by  side  with  the  reduction  of  the 


264        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

rates  on  the  lower  classes  of  goods,  there  went  a  steady  increase 
in  those  on  the  dearer  goods.     In  each  successive  act  the  same 
general  scheme  (that  of  1861)  was  maintained:  the  specific  duties 
being  adjusted  first  according  to  the  number  of  threads  per 
square  inch  of  cloth  and  then  according  as  the  cloth  was  bleached, 
dyed,  printed.     In  the  acts  of  1897  and  1909  still  another  method 
of  differentiation  was  added,  —  the  number  of  square  yards  to 
the  pound,  i.  e.,  the  weight  per  square  yard;   the  fabrics  within 
each  class  being  subjected  to  higher  duties  as  they  were  lighter  in 
weight.     It  is  not  important  for  the  present  discussion  to  follow 
the  changes  in  detail:  it  will  suffice  to  indicate  the  general  trend 
by  noting  the  maximum  duties  on  the  finest  fabrics.      The  maxi- 
mum was  in  1883  6  cents  a  yard;  in  1890,  6f  cents;  in  1897, 
8  cents;   and  in  1909,  12I  cents.1     Part  and  parcel  of  the  same 
tendency  was  the  increase  in  the  dragnet  rate,  —  the  general 
ad  valorem  rate  on  manufactures  of  cotton  not  specifically  enu- 
merated.    The  dragnet  clause  levied,  in  1861,  a  duty  of  30  per 
cent;  in  1883,  one  of  35  per  cent;  in  1890,  40  per  cent;  in  1897 
and  1909,  45  per  cent.      The  cotton  schedule,  comparatively 
simple  in  1861,  became  extremely  complex,  —  so  much  so  that 
the  significance  of  the  rates  and  gradations  of  duty  was  difficult 
to  follow,  and  the  rates  became  susceptible  to  the  sort  of  manipu- 
lation indicated  by  the  term  "  joker."     The  unusually  intricate 
provisions  in  the  cotton  schedule  of  1909  gave  opportunity  for 
veiled  and  disguised  increases  of  duty  which  contributed  much  to 
the  feeling  of  suspicion  and  revolt  aroused  by  this  last  step  in  the 
ultra-protectionist  series.2 

1  The  marked  increase  of  the  maximum  rate  in  1909  was  due  to  still  another 
refinement  in  the  elaboration  of  the  specific  duties.  In  previous  acts  there  had 
been  a  dragnet  clause  on  cotton  cloths:  all  cloths  above  a  certain  value  were  sub- 
jected to  one  ad  valorem  rate.  This  ad  valorem  rate  had  been  25  per  cent  in  1861, 
35  per  cent  in  1864,  40  per  cent  in  1883,  and  again  40  per  cent  in  1897  and  1909 
(45  per  cent  in  1890).  In  1909  it  was  further  provided  that  the  very  finest  and  most 
expensive  goods,  if  valued  over  25  cents  a  yard,  should  be  charged  12^  cents  a  yard, 
but  in  no  case  less  than  40  per  cent.  —  This  dragnet  clause,  or  omnibus  ad  valorem 
duty,  on  cotton  cloths  is  not  to  be  confounded  with  the  similar  dragnet  clause  on 
miscellaneous  cotton  manufactures  "  not  otherwise  provided  for,"  to  which  reference 
is  made  in  the  text. 

2  On  the  changes  of  duty  in  1909,  see  an  instructive  article  by  S.  M.  Evans,  in 
the  Journal  of  Political  Economy,  December,  1910,  "  The  Making  of  a  Tariff  Law  "; 


THE  COTTON  MANUFACTURE 


265 


The  tariff  of  1913,  it  need  hardly  be  said,  made  a  great  breach 
in  this  huge  and  complicated  structure.  It  substituted  for  the 
mass  of  intricate  and  heavy  specific  duties  a  simple  system  of 
moderate  ad  valorem  duties.  These  were  graded,  ranging  from  a 
minimum  of  5  per  cent  to  a  maximum  of  30  per  cent.  The  lowest 
rate  imposed  (5  per  cent)  was  on  the  coarsest  yarns;  the  highest 
(30  per  cent)  was  on  the  finest  woven  fabrics.1  The  change  in 
the  figures  of  the  statute-book  was  very  great.  But,  as  will 
appear  presently,  the  effect  on  the  cotton  manufacture  was  in 
most  cases  negligible.  Only  on  the  finer  goods  was  the  reduction 
of  real  consequence.  At  the  date  of  writing  these  pages  (1914) 
it  is  still  uncertain  what  will  be  the  effects  of  the  changes  on  the 
finer  goods. 

What  effects  can  be  traced  to  the  high  duties  maintained 
throughout  the  half-century  that  followed  the  civil  war  ?     Those 

and  a  careful  analysis  by  M.  T.  Copeland,  in  the  Quarterly  Journal  of  Economics, 
February,  1910.  For  an  elaborate  statement  of  the  duties  on  cottons  from  1890 
to  1909,  see  the  Tariff  Board's  Report  on  Cotton  Manufacture  (191 2),  pp.  290  seq. 

The  Tariff  Board  Report  gave  abundant  illustrations  of  the  high  range  of  the 
duties  on  cottons  until  19 13,  pointing  out  that  in  most  cases  the  duties  on  cotton 
cloths  were  higher  than  the  total  "  conversion  cost "  of  the  goods,  —  i.  e.,  higher 
than  the  total  expenses  of  production  over  and  above  the  raw  material.  See  the 
Board's  introductory  statement  or  analysis,  pp.  10-14,  and  more  detailed  state- 
ments at  pp.  440,  458,  503  passim. 

1  The  plan  on  which  the  duties  on  cotton  goods  were  fixed  in  19 13  is  indicated 
by  the  following  tabular  statement :  — 

Duty  on  Cloths 
that  are  Bleached, 
Printed,  Dyed, 
Duty  on  Yams  Unbleached  Cloths,       Woven  with  Figures, 

Mercerized,  etc., 
Made  from 
Such  Yarns 


Yarns,  numbers    1  to    9 
10  "  39 

a  a  a 

4°     40 
and  so  on,  until 

Yarns,  numbers  80  to  90    . 
Yarns  above  number  too . . 


5    per  cent 
1\       * 
10 

25 


Duty  on  Plain, 

Unbleached  Cloths, 

Made  from 

Such  Yarns 

7  J  per  cent 

10         " 

I2§ 

25 

27J       « 


10   per  cent 
"i       " 

IS 


3° 


This  is  a  symmetrical  arrangement;  the  duty  on  plain  cloths  is  always  2§  per 
cent  higher  than  that  on  the  yarns  with  which  they  are  woven,  and  the  duty  on 
cloths  printed,  etc.,  is  always  2§  per  cent  higher  still.  The  symmetry,  however,  is 
more  in  appearance  than  in  reality.  The  arrangement  left  the  duties  on  some  cheap 
cloths  in  effect  higher  than  on  many  dear  cloths;  since  raw  cotton  enters  so  largely 
in  the  price  of  the  former,  and  causes  an  ad  valorem  duty  to  be  high  in  relation  to 
manufacturing  (or  "  conversion  ")  cost. 


266        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

on  fabrics  of  cheaper  grade,  —  the  staple  goods  of  the  industry,  — 
were  quite  prohibitory.  Those  on  finer  goods,  though  not  in  all 
cases  prohibitory,  were  put  up  notch  by  notch  in  the  successive 
protectionist  acts,  with  the  design  of  promoting  the  manufacture 
of  such  goods  within  the  country.  The  free  trader  might  be  led 
to  predict  that  the  extreme  rates  on  the  ordinary  goods,  and  the 
exclusion  of  foreign  competition  as  regards  them,  would  lead  to 
something  like  stagnation  in  this  part  of  the  domestic  industry. 
On  the  other  hand,  the  high  effective  rates  on  the  dearer  goods 
might  be  expected  by  the  protectionist  not  only  to  put  an  end  to 
their  importation  and  cause  domestic  goods  to  be  substituted  for 
them,  but  also  to  bring  about  some  results  of  the  young  indus- 
tries type,  —  improvements  in  the  field  newly  opened  for  the 
Americans,  and  attainment  of  independence  or  at  least  indica- 
tions of  some  approach  to  independence. 

First  a  general  survey  may  be  made  of  the  growth  of  the  in- 
dustry at  large.  The  following  figures  indicate  how  steady  and 
great  was  the  increase  in  domestic  production,  how  comparatively 
small  were  the  imports. 


Cotton  Goods,  1860-19101 

Year 

No.  of 
Establish- 
ments 

No.  of 
Spindles 
(Millions) 

Cotton  Used 
(Million 
Pounds) 

Persons 
Employed 

Value  of 
Product 
(Million 
DoUars) 

Imports 
(Million 
Dollars) 

i860 

1,091 

5-2 

422.7 

122,000 

"5-7 

38.2 

1870 

956 

7-i 

398.3 

135,000 

177-5 

234 

1880 

756 

10.7 

75°-3 

175,000 

192. 1 

29.9 

1890 

90S 

14.2 

1,118.0 

219,000 

268.0 

29.9 

1900 

973 

19.0 

1,814.0 

298,000 

332.8 

41-3 

1910 

1,208 

27.4 

2,332.2 

371,000 

616.5 

66.5 

It  will  be  seen  that  the  domestic  industry  grew  rapidly  and 
without  check.  The  best  single  indication  of  the  extent  and 
growth  of  such  an  industry  as  the  cotton  manufacture  is  in  the 
number  of  spindles;  and  on  this  the  statistics  have  been  suffi- 
ciently accurate.     The  spindles  in  19 10  were  more  than  five  times 

1  See  Copeland,  p.  16.  These  are  the  census  figures,  published  in  the  enumera- 
tions of  the  stated  years,  but  referring  to  the  conditions  of  the  years  severally  pre- 
ceding (e.  g.,  the  figure  of  1910  gives  information  on  the  industry  as  it  stood  in  1909). 


Bin 


THE  COTTON  MANUFACTURE  267 

as  many  as  in  i860,  —  twenty-seven  millions  as  compared  with 
about  five  millions.  The  same  rate  of  growth  is  indicated  by  the 
consumption  of  raw  cotton;  this  also  increased  five-fold.  The 
value  of  the  product  (a  figure  to  be  used  with  much  more  caution) 
also  increased  nearly  five-fold.  The  number  of  persons  employed 
increased  distinctly  less,  about  three-fold,  —  an  indication  of  a 
growingeffectiveness  of  labor,  such  as  any  manufacturing  industry 
may  be  expected  to  show.  The  stationary  number  of  separate 
establishments  is  also  in  accord  with  the  general  trend  of  modern 
industry;  production  is  on  a  larger  scale,  the  individual  estab- 
lishment becomes  greater,  the  total  number  of  establishments 
does  not  keep  pace  with  the  growing  volume  of  production. 

The  imports,  on  the  other  hand,  show  no  considerable  change, 
except  in  the  very  last  decade.  As  in  the  case  of  silks,  they 
remain  not  far  from  constant  absolutely,  and  thus  become  a 
steadily  diminishing  proportion  of  the  total  supply.  In  i860 
they  were,  in  value,  still  not  very  far  from  one-third  of  the  domes- 
tic output;  in  1910,  little  more  than  one-tenth.1  It  will  be 
shown  presently  that  these  general  figures  need  much  explanation. 
The  continuing  imports  are  in  large  part  specialties ;  those  which 
really  compete  with  the  domestic  products  are  even  less  con- 
siderable than  the  figures  would  indicate.  It  is  clear,  however, 
that  a  very  great  increase  in  the  cotton  industry  has  taken  place 
within  the  country.  Here  also  the  protective  system  would 
seem  to  have  succeeded  in  attaining  at  least  one  object,  —  a 
great  preponderance  of  domestic  supply,  a  lessening  dependence 
on  imports. 

Proceeding  now  to  a  more  detailed  consideration  of  the  several 
branches  of  the  industry,  let  attention  be  given  first  to  the  manu- 
facturing of  the  cheaper  grades.  This  was  the  earliest  to  be 
established,  and  the  only  one  that  flourished  before  the  civil  war. 
As  has  just  been  noted,  it  seems  to  have  already  reached  in  that 
period  the  stage  of  independence.  The  foreign  (British)  com- 
petitors were  not  feared,  except  possibly  in  times  of  exceptional 

1  In  comparing  domestic  and  foreign  supply,  attention  must  be  given  to  the 
effect  of  the  duties  in  adding  to  the  price  paid  by  consumers  for  the  foreign  goods. 
How  far  allowance  should  be  made,  and  can  be  made,  for  this  circumstance  has  been 
considered  in  the  similar  case  of  silks;  see  p.  222,  note,  supra. 


268        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

depression  in  the  foreign  markets.  Exports  on  a  considerable 
scale  had  begun.  Even  the  comparatively  moderate  duties  of 
1861  had  been  virtually  prohibitory  on  the  cheaper  goods;  they 
were  prohibitory  beyond  doubt  through  the  half-century  after 
the  war  duties  of  1864.  The  domestic  manufacture  in  this 
branch  has,  therefore,  gone  its  own  way,  quite  untroubled  by 
foreign  competition. 

This  part  of  the  cotton  manufacture  remained,  after  the  war 
as  before,  quantitatively  by  far  the  most  important.  In  1905,  the 
census  report  on  the  industry  stated  that  "  almost  three-fourths 
of  all  the  woven  goods  reported  fall  under  the  classification  of 
coarse  or  medium  counts,  —  print  cloths,  sheetings,  and  shirtings, 
drills,  ticks,  denims  and  stripes,  duck  and  bagging."  x  Over 
one-half  of  the  yarn  spun  in  American  mills  was  in  1905  and  in 
1910  of  the  low  counts  (1  to  20)  used  for  distinctly  coarse  goods. 
Five-sixths  of  the  remainder  was  of  counts  still  low  (20  to  40),  — 
what  might  be  called  low-medium  counts.2  In  other  words,  only 
one-twelfth  of  the  quantitative  output  (pounds)  could  be  reck- 
oned as  spun  for  the  fine  or  better  medium  goods.  The  great 
growth  which  has  taken  place  in  the  industry  has  therefore  been 
predominantly  in  that  branch  already  firmly  established  before 
the  system  of  high  protection  was  applied. 

With  this  growth  in  the  manufacture  of  the  ordinary  (cheaper) 
goods,  a  marked  change  has  taken  place  in  geographical  distribu- 
tion. Until  1880,  New  England  and  the  middle  states  were 
almost  the  sole  seats  of  the  industry.     After  that  date  a  rapid 

1  Quoted  by  Copeland,  p.  21.  The  situation  appeared  to  be  the  same  in  the 
census  figures  of  1910,  from  which  I  have  compiled  the  following  figures  {Bulletin 

on  Cotton  Manufactures,  1910,  p.  16):  — 

Yards  Value 

Total  woven  cotton  goods    6,348  millions  456  million  dollars 

Of  which  coarse  or  medium  (as  enumerated  in  the  text)     5,436        "  275        ■  " 

2  Copeland,  p.  21.  The  figures  of  1910  (Census  Bulletin,  p.  20),  again  tell  the 
same  story:  — 

Cotton  yarn  produced,  No.  20  and  under    1,014  million  lbs. 

0         No.  21  to  40    866       ■ 

■         «  ■         No.  41  and  over    157       "         " 

Total   2,037      "        * 

The  proportion  of  fine  yams  (forty-one  and  over)  was  reported  even  less  in  19 10 

than  in  1905. 


THE  COTTON  MANUFACTURE  269 

growth  took  place  in  the  south  (chiefly  in  South  Carolina,  North 
Carolina,  and  Georgia)  until  by  19 10  this  region  became  compar- 
able in  importance  with  the  northern  states.  The  goods  made 
in  the  south  have  been  almost  exclusively  of  the  ordinary  grades; 
and  this  circumstance  has  much  affected  the  character  of  the  in- 
dustry elsewhere.  The  northern  mills,  especially  those  of  New 
England,  felt  the  competition  of  the  south  on  the  cheaper  grades 
and  turned  more  than  before  to  the  finer.  In  the  older  seats  of 
the  industry,  therefore,  the  diversification  has  been  greater  than 
the  general  figures  indicate.  The  finer  goods  are  made  almost 
exclusively  in  the  north,  and  chiefly  in  New  England;  and  hence 
they  form  in  the  last  mentioned  region  a  much  more  important 
constituent  than  they  do  in  the  country  at  large.  Yet  even  here 
much  the  greater  part  of  the  manufacture  is  still  given  to  the 
cheaper  goods.1  What  causes  have  influenced  the  great  growth 
in  the  south,  and  the  tenacious  hold  even  of  the  cheaper  grades 
in  the  north,  will  be  considered  as  we  proceed. 

More  significant,  however,  than  the  volume  of  growth  was  the 
technical  development  of  the  cotton  manufacture.  Both  the 
changes  which  took  place  in  the  American  mills  and  those  which 
failed  to  take  place  are  instructive.  It  is  chiefly  in  the  manu- 
facture of  the  cheaper  goods  that  machinery  and  methods  were 
remodelled;  as  regards  dearer  goods  there  has  been  least  tendency 
to  divergence  from  the  practices  of  European  rivals,  especially 
of  Great  Britain.  It  will  be  convenient  to  describe  briefly  the 
technical  changes  that  most  affected  the  American  industry,  pro- 
ceeding then  to  a  consideration  of  their  bearing  on  the  tariff 
problems. 

During  the  half-century  the  two  fundamental  processes  in  the 
mills  —  spinning  and  weaving  —  underwent  changes  almost 
revolutionary  as  regards  the  cheaper  goods  which  constitute  the 
bulk  of  the  American  output. 

1  Thus  in  19 10  the  New  England  states  were  reported  to  produce  three-quarters 
of  all  the  fine  yarn,  and  Massachusetts  alone  over  two-fifths  (41.5  per  cent).  Yet 
in  Massachusetts  the  coarse  and  medium  counts  still  very  greatly  exceeded  the  fine 
(Census  Bulletin,  p.  20). 

Coarse  cotton  yarn  in  Massachusetts  (20  and  under) 175  million  lbs. 

Medium  "  «      «  "  (21  to  40)    283       "         ■ 

Fine         "         " ,    "  "  (41  and  over) 65       "         ■ 


270        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

In  spinning,  the  great  change  has  been  the  extraordinary- 
growth  of  ring  spinning l  and  the  decline  of  mule  spinning.  The 
following  figures  show  what  sort  of  transition  has  taken  place : 

Cotton  Spindles  in  the  United  States  (millions)  2 

1870       1890      1900  1910 

Ring   3-7           8.8         13.4  22.7 

Mule 3-4           5-4          5-6  4-7 

Total 7-i         14-2         19.0        27.4 

It  will  be  seen  that  the  number  of  ring  spindles  has  increased 
without  halt,  both  absolutely  and  relatively.  The  number  of 
mule  spindles,  on  the  other  hand,  has  hardly  increased  at  all. 
Though  there  was  some  gain  in  the  twenty  years  from  1870  to 
1890,  a  loss  followed  from  1890  to  19 10,  so  that  in  the  last-named 
year  the  total  of  mule  spindles  exceeded  but  little  that  of  1870. 
At  the  outset  (1870)  the  two  kinds  were  in  use  half  and  half;  at 
the  close  (19 10)  the  ring  spindles  had  increased  nearly  ten-fold, 
and  constituted  five-sixths  of  the  total. 

The  mule  spindle  is  in  essentials  that  invented  by  the  English 
pioneers  in  the  industrial  revolution  of  the  eighteenth  century. 
As  perfected  by  Crompton,  it  involved  the  placing  of  a  large 
number  of  spindles  on  a  single  stand  or  carriage  which  moves 
to  and  fro,  spinning  on  its  movement  one  way  only,  and  getting 
ready  for  the  next  spinning  on  the  return  movement.  Ring 
spinning  is  more  recently  invented,  still  more  recently  of  wide  use. 
The  essential  of  the  device  is  a  small  steel  ring,  through  which 
passes  the  roving  (the  smoothed  and  partitioned  sliver  of  flimsy 
cotton)  and  in  passing  is  given  the  twist  which  pulls  the  fibres 
together  into  yarn.  Of  American  invention  (1828),  it  came  into 
extensive  use  in  the  United  States  even  before  the  war.  After 
the  war,  and  particularly  in  the  decade  from  1880  to  1890,  it  was 
immensely  improved  by  a  series  of  subsidiary  changes,  and  took 
the  commanding  place  in  the  industry  indicated  by  the  figures 
just  given.3 

1  Also  designated  "  frame  spinning." 

2  Copeland,  p.  70;  Census  Bulletin  of  1910,  p.  22.  No  separation  of  the  two 
kinds  of  spindles  was  made  in  the  census  of  1880. 

3  A  detailed  account  of  the  development  of  ring  spinning  is  in  a  paper  by  W.  F. 


THE  COTTON  MANUFACTURE  27 1 

The  industrial  differences  between  the  two  methods  of  spinning 
can  be  stated  without  entering  on  the  complicated  mechanical 
details.  The  ring,  in  brief,  is  better  adapted  for  coarser  yarns, 
for  economy  of  space,  for  large-scale  operations,  for  that  combi- 
nation of  spinning  and  weaving  in  the  same  establishment  which 
has  always  been  the  rule  in  American  mills,  and,  last  but  not 
least,  for  the  utilization  of  labor  little  skilled.  The  ring  spins 
continuously,  not  intermittently  as  does  the  mule;  and  for  this 
reason,  as  well  as  for  others,  the  ring  produces  more  per  spindle. 
The  ring  puts  more  strain  on  the  yarn,  and  hence  is  available 
primarily  for  the  coarser  yarns;  yet  the  march  of  improvement 
has  made  it  available  for  yarns  less  coarse  than  in  the  earlier 
stages  of  its  use.  It  yields  yarn  comparatively  harsh,  and  not 
acceptable  where  a  softer  quality  is  needed  (e.  g.,  for  most  hosiery) 
or  where  much  sizing  is  to  be  put  into  the  fabric  (as  is  commonly 
done  in  England).  The  ring  winds  the  yarn  on  wooden  bobbins 
of  appreciable  size  and  weight;  and  the  yarn  thus  wound  and 
mounted  is  more  expensive  to  transport  than  that  which  comes 
from  the  mule.  Hence  arises  an  obstacle  to  specialization  be- 
tween spinning  and  weaving;  ring  spinning  strengthens  the 
general  American  practice  of  combining  the  two  in  one  establish- 
ment. 

Perhaps  most  important  of  all  is  the  difference  in  the  kind  of 
labor  force  required.  Mule  spinning  is  a  trade,  and  mainly  a 
man's  trade.  The  spinner  is  a  skilled  workman,  or  at  least  comes 
close  to  that  grade.  In  Great  Britain  the  trade  is  often  heredi- 
tary. It  has  been  stated  to  the  present  writer,  by  conversant 
persons,  that  only  a  boy  who  has  grown  up  in  a  mill  can  become 
a  good  mule  spinner.  The  statement  doubtless  is  exaggerated, 
but  doubtless  rests  on  a  basis  of  fact.  Mule  spinners  have  strong 
unions;  they  cannot  be  readily  replaced  when  they  strike.     They 

Draper  in  Transactions  New  England  Cotton  Manufacturers'  Association,  no.  50 
(1891).  The  date  of  first  invention  is  there  given  as  1828;  other  dates  near  this 
are  also  given  (cf.  Copeland,  p.  9).  The  Draper  Company  took  the  lead  in  manu- 
facturing ring  spindles,  incorporating  improvements  of  their  own  into  the  most 
promising  of  previous  spindles;  and  spindles  of  their  make  came  into  use  by  the 
million.  Compare  what  is  said  below  (at  p.  276)  of  the  same  company's  primacy  in 
developing  the  automatic  loom. 


272         SOME  ASPECTS  OF  THE  TARIFF  QUESTION 


are  often  accused  by  the  manufacturers  of  being  a  turbulent  and 
unruly  set,  of  clannishly  opposing  the  entrance  of  recruits  into 
the  trade,  of  having  a  trade-union  monopoly;  all  of  which  are 
indications  that,  though  the  degree  of  skill  may  be  exaggerated, 
the  men  must  have  some  of  the  qualities  of  the  skilled  handi- 
craftsman. The  ring,  on  the  contrary,  is  more  automatic,  needs 
less  continuous  and  alert  watching,  can  be  operated  with  little 
need  either  of  strength  or  skill.  Ring  spinning  has  been  very 
greatly  improved  in  the  United  States  during  the  half-century; 
and  the  improvements  have  taken  the  direction  of  making  the 
machinery  more  self-acting,  less  in  need  of  skilled  attention,  less 
liable  to  breakdown  and  repair.  Ring  spinners  are  always  women 
and  children,  who  can  be  easily  trained  and  easily  replaced. 

The  difference  in  the  needed  quality  of  labor  goes  far  to 
account  for  the  unequal  distribution  of  mule  spindles  and  ring 
spindles  in  the  various  seats  of  the  American  industry.  Mule 
spinning  in  the  United  States  is  confined  almost  entirely  to  the 
north.  Even  there  it  is  overshadowed  by  its  rival;  while  in  the 
south  there  is  virtually  no  mule  spinning  at  all.  The  figures 
from  the  Census  of  1910  again  tell  the  story.  1 

The  progress  of  invention  in  ring  spinning  machinery  has  been 
characteristic.  A  series  of  Yankee  machinists  and  manufacturers 
experimented  with  the  various  refinements  of  the  device,  vied 
with  each  other  in  offering  the  cotton  manufacturers  different 
variants,  added  improvement  to  improvement,  until  by  a  process 
of  selection  and  survival  the  well-nigh  perfect  machine  was  de- 
veloped. The  number  of  revolutions  per  minute  had  been  5,500 
in  i860,  and  became  9,000  by  1890.  The  operation  of  the  spindle 
was  declared  by  the  foremost  expert  to  be  "  so  near  absolute  per- 
fection that  it  would  seem  as  though  no  changes  were  required."  2 

1  Census  Bulletin  of  igio  on  Cotton  Manufactures,  p.  22. 

Ring  Spindles     Mule  Spindles 
(Millions)  j  (Millions) 

Massachusetts 7.2  2.1 

Rhode  Island 2.3  1.4 

South  Carolina   3.7  .02 

North  Carolina 2.8  .06 

Georgia 1.7  .07 

2  W.  F.  Draper's  paper,  p.  38. 


THE  COTTON  MANUFACTURE  273 

Yet  after  that  date  the  speed  of  revolution  was  raised  to  10,000 
per  minute,  even  to  more  in  some  cases;  some  such  figure  being 
apparently  the  maximum  for  the  device  as  it  now  (1910)  stands.1 
No  more  labor,  no  more  power,  no  more  space  were  required  for 
the  improved  spindle;  the  doubling  of  speed  meant  a  doubling  of 
output. 

Even  more  important  than  the  changes  in  spinning  were  those 
in  weaving.  As  has  already  been  noted,  weaving  was  carried  on 
by  Americans  with  special  aptitude  and  success  from  the  very 
beginnings  of  the  modern  textile  industries.  The  power  loom 
was  put  into  use  —  nay,  virtually  invented  —  in  the  cotton  mills 
of  the  United  States  contemporaneously  with  its  introduction  in 
England.2  By  the  first  third  of  the  nineteenth  century  the  weav- 
ing processes  in  American  mills  were  found  by  a  skilled  observer 
to  be  at  least  equal  to  those  in  England,  perhaps  superior.3  And 
in  the  closing  decade  of  that  century  a  new  invention,  that  of  the 
automatic  loom,  was  perfected  in  the  United  States  and  adopted 
almost  universally  for  the  cheap  and  medium  goods. 

The  ordinary  power  loom  in  a  sense  is  automatic ;  the  weaver 
is  no  more  than  an  attendant  who  simply  sees  that  the  machine 
runs  as  it  should.  The  degree  of  attention,  however,  varies 
greatly  according  to  the  nature  of  the  material  turned  out.  On 
some  goods  the  power  loom  weaver  can  operate  but  one  loom,  as 
did  the  hand  loom  weaver  before  him;  and  he  must  have  some  of 
the  qualities  of  the  skilled  artisan.  Such  is  the  case  with  finer 
woolen  and  silk  fabrics;  and,  as  has  already  been  noted  for  silks 
and  will  be  pointed  out  presently  for  woolens  also,4  these  are  the 
branches  of  the  textile  industries  which  are  not  easily  domiciled 
in  the  United  States.  But  on  plain  cotton  goods  of  the  cheaper 
grades  the  power  loom  had  long  been  developed  to  the  point 
where  the  mechanism  largely  took  care  of  itself,  and  where  a 
weaver  could  attend  to  six  or  eight  looms,  sometimes  even  more. 
One  operation,  however,  had  not  been  subjected  to  the  machine, 

1  Copeland,  p.  67. 

2  See  my  Tariff  History  of  the  United  States,  p.  29,  and  the  reference  there  given. 

3  Ibid.,  p.  138;  Copeland,  p.  83;  see  also  James  Montgomery,  The  Cotton  Manu- 
facture of  the  United  States  (Glasgow,  1840),  p.  101. 

4  See  above,  p.  230,  on  silks,  and  below,  p.  362,  on  woolens. 


274         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

and  thereby  a  limitation  had  remained  on  its  uninterrupted  work- 
ing,— that  of  replacing  the  supplies  of  weft  as  they  were  exhausted. 
The  yarn  is  wound  on  bobbins;  as  one  bobbin  is  emptied  by  the 
loom,  another  must  be  put  in  its  place  in  the  shuttle,  and  the 
thread  from  this  other  must  be  attached  to  the  shuttle  which 
moves  to  and  fro  in  the  loom.  The  chief  business  of  the  weaver 
on  the  ordinary  power  loom  is  to  replace  bobbins  as  they  are 
emptied,  and  to  attach  the  thread  of  the  fresh  bobbin  to  the 
shuttle.  On  the  average  the  loom  has  to  be  stopped  once  in 
eight  minutes  to  accomplish  these  two  closely-related  steps.  The 
automatic  loom  achieved  the  crowning  triumph  of  carrying  out 
both  without  the  use  of  the  human  hand.1  A  magazine  is  attached 
to  the  loom,  containing  a  supply  of  filled  bobbins,  which  are 
automatically  transferred  to  the  loom  shuttle.  The  shuttle  itself 
is  automatically  threaded  by  the  motion  of  the  loom;  and  this 
takes  place  whether  the  bobbin  is  completely  emptied  or  whether 
its  thread  is  by  accident  broken  before  emptying.  In  either  case 
the  shuttle  automatically  catches  up  a  thread  from  a  fresh  bobbin, 
and  the  loom  continues  to  work  without  interruption.  The  un- 
hygienic process  of  attaching  the  fresh  thread  to  the  bobbin  by 
the  weaver's  sucking  it  in  is  done  away  with.2  If  a  warp  (not 
weft)  thread  breaks,  the  loom  stops  automatically,  and  the  weaver 
ties  the  broken  ends.     The  weaver  now  has  become  more  than 

1  "  In  simple  terms,  these  inventions  cover  a  shuttle  changing  device,  a  rilling 
hopper  from  which  bobbins  or  cop  spindles  containing  filling  yarn  are  automatically 
transferred  to  the  loom  shuttle,  —  a  peculiar  shuttle  which  can  be  threaded  auto- 
matically by  the  motion  of  the  loom,  —  devices  that  act  to  stop  the  loom,  or  prevent 
damage  in  case  the  shuttle  is  not  in  proper  position  to  receive  new  filling  or  the 
hopper  is  exhausted,  and  a  warp  stop  motion  to  prevent  the  loom  from  making 
poor  cloth  when  not  watched  by  the  weaver."  George  O.  Draper,  "  Development 
of  the  Northrop  Loom,"  in  Transactions  of  the  New  England  Cotton  Manufacturers' 
Association,  no.  59,  p.  91.     Cf.  Copeland,  pp.  84-88. 

2  The  weaver's  act  of  thus  sucking  the  thread  carries  bits  of  lint  and  dust  into 
the  lungs,  and  the  irritation  increases  the  danger  of  tuberculosis.  "  A  weaver  on 
eight  common  looms  stands  a  chance  of  inhaling  cotton  fibre  about  one  thousand 
times  a  day.  It  is  no  wonder  they  are  a  shortlived,  consumptive  class."  Ibid., 
p.  100.  The  danger,  which  persists  on  the  ordinary  power  looms,  is  real,  though 
often  exaggerated.  It  is  in  accord  with  frequent  experience  in  matters  of  this  kind 
that  mechanical  devices  for  threading  the  shuttles,  even  when  put  freely  at  the 
weavers'  disposal  and  with  urgent  advice  to  use  them,  are  left  unused;  it  is 
easier  and  quicker  to  suck. 


THE  COTTON  MANUFACTURE  275 

ever  a  mere  attendant,  keeping  an  eye  on  the  looms  and  seeing 
what  is  wrong  when  they  are  brought  to  a  stop  by  the  automatic 
devices.  The  commonest  cause  of  stoppage  is  the  breaking  of 
a  thread,  and  the  commonest  task  of  the  weaver  is  to  tie  a 
broken  thread. 

Weaving  on  the  modern  power  loom,  whether  of  the  automatic 
type  or  the  ordinary  type,  calls  for  no  strength  or  special  skill. 
It  is  not,  to  be  sure,  reducible  to  simple  routine  as  completely  as 
ring  spinning.  Some  alertness  is  required;  and  the  weaver  gets 
the  pay  of  the  average  factory  worker.  But  women  can  be  used 
as  well  as  men,  and  they  seem  to  be  equally  efficient.  More  im- 
portant, so  far  as  concerns  the  automatic  loom,  is  the  possibility 
of  a  more  highly  developed  division  of  labor.  A  separate  staff 
(of  young  persons,  boys  or  girls)  can  be  given  the  simple  task  of 
keeping  the  magazines  charged  with  bobbins;  the  weaver  can  be 
relieved  of  this,  and  called  on  solely  to  keep  his  (or  her)  eye  on 
the  looms.  The  oiling  of  the  looms  and  dusting  of  the  floors  can 
be  turned  over  to  another  set  of  unskilled  persons.1 

Yet  some  skilled  labor  remains  indispensable,  and  on  the  auto- 
matic loom  perhaps  even  more  so  than  on  the  ordinary  loom.  The 
loom  fixer,  a  highly  expert  mechanic,  must  be  in  attendance,  to 
correct  any  defect  in  the  working  of  the  complicated  mechanism 
or  order  the  transfer  of  a  loom  to  the  repair  shop  if  something 
serious  has  happened.  The  skilled  artisan  is  by  no  means  dis- 
pensed with  in  the  modern  development  of  machinery.  His 
sphere  of  action  is  merely  shifted,  and  his  skill  is  turned  where 
most  needed.  This  is  one  of  the  reasons  why  machinery  which  is 
dubbed  "  automatic  "  can  never  be  transported  to  regions  where 
there  is  abundance  of  cheap  and  unskilled  labor,  but  labor  of  that 
kind  only.     It  calls  for  much  more  than  mere  tending  and  feed- 

1  The  practice  in  mills  varies.  In  one  mill  which  I  visited,  each  weaver  was  in 
charge  of  thirty  automatic  looms,  there  being  separate  staffs  of  magazine-fillers 
and  oilers.  In  another,  twenty  looms  were  allotted  to  each  weaver,  but  he  (or  she) 
was  compelled  to  see  to  the  charging  of  the  magazines.  When  the  Northrop  loom 
was  first  put  on  the  market,  its  makers  predicted  that  a  weaver  could  manage 
twenty-four  looms  and  also  attend  to  his  magazines.  Something  depends  on  the 
character  of  the  fabrics. 

A  loom  fixer  can  attend  to  about  150  ordinary  looms,  100  automatic  looms;  this 
item  of  expense  is  higher  for  the  automatics. 


276         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

ing.  It  must  be  supervised  and  kept  in  order;  there  must  be 
intelligent  and  experienced  foremen  and  superintendents,  and 
a  staff  of  skilled  mechanics,  such  as  these  very  loom  fixers. 
However  perfected  the  machine,  —  nay,  the  more  it  is  per- 
fected, —  the  human  hand  and  the  human  brain  are  still  in- 
dispensable. 

The  Northrop  automatic  loom,  —  so  named  from  one  among 
the  inventors  by  whom  it  was  worked  out,  —  illustrates  several 
matters  noteworthy  in  the  history  of  modern  inventions.  In  the 
first  place,  it  was  deliberately  planned,  and  brought  to  the  point 
of  success  after  prolonged  and  expensive  experimenting.  A 
number  of  inventors  were  kept  at  work  on  it  for  years.  Some 
sixty  patents  were  taken  out  or  applied  for  in  the  course  of  the 
experiments;  and  the  instance  is  one  among  many  to  show  that 
the  patent  system,  however  ill  adjusted  it  may  have  been  in  some 
of  its  details,  serves  to  stimulate  invention  and  still  more  to  pro- 
mote investment  in  inventions  calling  for  long  and  expensive 
trial.  When  finally  ready  to  be  put  on  the  market,  a  demonstra- 
tion of  its  efficiency  had  to  be  given;  and  the  firm  which  developed 
it  had  to  shoulder  the  additional  experiment  and  investment  of 
equipping  a  large  cotton  mill  in  which  the  loom  was  first  used 
in  manufacturing  on  a  considerable  scale.  It  required  this  kind 
of  proof,  highly  effective,  but  necessitating  a  still  further  commit- 
ment of  funds,  to  bring  the  automatic  loom  into  wide  use.  Con- 
vincing the  demonstration  was.  It  became  clear  that,  whereas 
a  weaver  could  attend  to  eight  ordinary  looms,  he  could  look 
after  twenty,  twenty-four,  even  thirty  automatic  looms.  Though 
the  capital  outlay  was  larger  (the  automatic  looms  are  much 
more  expensive),  the  saving  in  current  labor  was  so  great  that 
the  cost  of  weaving  was  cut  in  two.  The  use  of  the  loom 
spread  with  great  rapidity,  and  soon  this  process  dominated  the 
manufacture  of  the  ordinary  grades  of  plain  cotton  goods.1 

1  The  Northrop  loom  is  associated  with  the  name  of  the  Draper  Company,  whose 
works  are  at  Hopedale,  Mass.  The  experiments  that  led  to  it  were  spread  over  a 
period  of  seven  years.  The  first  loom  was  ready  for  trial  in  1889.  A  number  were 
run  experimentally  at  Hopedale  in  1893;  the  demonstration  mill  referred  to  in  the 
text  was  constructed  at  Burlington,  Vt.,  in  1894.  An  interesting  and  authoritative 
account  of  the  history  of  the  invention  was  given  by  Mr.  G.  O.  Draper  in  the 


THE  COTTON  MANUFACTURE  2JJ 

An  instructive  aspect  of  this  development  is  that  it  has  by  no 
means  stood  alone.  The  Draper  Company  had  competitors  and 
imitators.  A  host  of  inventors  and  mechanics  were  vying  with 
them.  So  it  was  with  the  ring  spindle  just  described;  there 
also  the  leaders  did  not  stand  alone,  but  were  spurred  on  by  many 
keen  rivals.  So  it  is,  indeed,  with  every  forward  movement, 
whether  in  literature,  in  the  fine  arts,  in  science,  in  the  mechanic 
arts.  The  genius  who  reaches  the  crowning  achievement  is  not 
isolated;  he  is  borne  forward  by  the  sweep  of  a  large  movement. 
And  every  such  movement  has  a  character  of  its  own,  —  the 
impress  of  the  influences,  little  understood  as  regards  their  rel- 
ative strength  or  their  channels  of  operation,  of  environment, 
historic  growth,  the  inborn  and  inherited  qualities  of  a  people. 
So  it  has  been  with  the  various  inventions  and  changes  which 
have  marked  the  industrial  growth  of  the  United  States  through- 
out its  history,  and  not  least  during  the  last  half-century. 

In  the  case  of  the  automatic  loom  —  to  return  to  this  —  rivals 
and  improvers  soon  appeared.  So  far  as  concerned  the  original 
field  of  the  Northrop  loom,  its  primacy  seems  to  have  been  little 
shaken;  there  was  rivalry,  possibly  an  improvement  in  one  detail 
or  another,  but  no  marked  advance.  In  a  neighboring  field, 
however,  a  striking  advance  was  stimulated  by  its  success.  The 
Northrop  loom  and  its  direct  rivals  were  suitable  only  for  plain 

paper  already  referred  to  in  the  Transactions  of  the  New  England  Cotton  Manu- 
facturers' Association,  no.  59. 

Both  Messrs.  W.  F.  Draper  and  G.  O.  Draper,  in  the  two  papers  quoted,  referred 
to  the  importance  of  the  patent  system  in  stimulating  and  sustaining  invention. 
No  less  than  373  patents  for  ring  spindles  were  taken  out  between  1870  and  1903 
(so  stated  by  Copeland,  in  Quarterly  Journal  of  Economics,  vol.  xxiv,  p.  127),  and 
60  for  automatic  loom  devices  (Draper,  in  Transactions,  no.  59,  p.  90). 

It  is  a  curious  fact  that  an  important  part,  perhaps  the  most  important,  in  these 
inventions  was  taken  by  men  who  had  had  no  previous  experience  in  weaving  rooms. 
"  Neither  Mr.  Northrop,  Mr.  Roper,  or  Mr.  Stimson  [three  among  the  inventors] 
ever  had  any  practical  knowledge  of  weaving.  Mr.  Northrop  had  never  examined 
a  loom  prior  to  our  [the  Draper  Company's]  start,  and  Mr.  Roper  had  probably 
never  seen  one."  G.  O.  Draper,  as  cited  above,  p.  92.  Similarly,  one  of  the  im- 
portant improvements  in  the  ring  spindle  came  from  a  clergyman,  the  Rev.  Mr.  Allen. 
W.  F.  Draper,  in  Transactions  New  England  Cotton  Manufacturers,  no.  50,  p.  34. 

It  may  be  noted  also  that  Cartwright,  the  inventor  of  the  power  loom,  "  if  he 
had  ever  seen  weaving  by  hand,  had  certainly  paid  no  particular  attention  to  the 
process."     Memoir  of  Cartwright  (1843),  p.  57. 


278         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

cloth,  or  goods  with  the  simplest  stripe  or  figure.  They  were 
not  available  for  the  ginghams  and  checks  in  which  weft  yarns  of 
more  than  one  color  are  used.  Such  fabrics  were  made  on  the  so- 
called  drop-box  looms,  —  a  variant  of  the  ordinary  power  loom. 
Here  again,  systematic  experimenting,  continued  over  ten  years 
and  more,  resulted  in  a  further  elaboration  of  the  machine's 
competence,  a  further  extension  of  the  range  of  automatic  action. 
Another  well-known  firm  l  put  on  the  market  in  1905,  a  decade 
after  the  introduction  of  the  Northrop  loom,  a  gingham  loom  in 
which  bobbins  containing  separate  colors  were  held  in  a  magazine 
and  automatically  selected  for  the  insertion  of  the  colored 
threads  in  the  chosen  pattern  of  cloth.  Advantages  of  the  same 
kind  as  from  the  Northrop  loom,  and  apparently  no  less  in  degree, 
were  secured  by  this  mechanism,  when  compared  with  the  pre- 
vious looms  for  parti-colored  fabrics.  There  was  no  interrup- 
tion for  putting  in  fresh  bobbins;  and  the  number  of  looms  which 
one  weaver  could  attend  was  increased  from  six  to  sixteen,  — 
here  also  more  than  double.  Limitations  still  remained;  the 
finer  and  more  variegated  goods  cannot  be  subjected  to  this  sort 
of  treatment;  it  was  available  only  for  goods  of  standardized 
pattern,  turned  out  on  a  considerable  scale.  But  for  the  pro- 
duction of  quantities  of  uniform  goods  on  a  large  scale  another 
striking  improvement  was  achieved. 

1  See  the  account  in  Dr.  Copeland's  article  on  "  Progress  of  the  Automatic 
Loom,"  Quarterly  Journal  of  Economics,  vol.  xxv,  p.  746  (August,  191 1),  to  which 
also  I  refer  for  the  other  matters  here  noted. 


CHAPTER  XVIII 

THE  COTTON  MANUFACTURE  CONTINUED,   CONTRASTS 
WITH  OTHER   COUNTRIES;  THE  INFLUENCE  OF 

THE  TARIFF 

The  consequence  of  the  inventions  and  improvements  described 
in  the  preceding  chapter  was  that  the  cotton  goods  to  which  they 
were  applicable  came  to  be  produced  not  only  as  cheaply  in  the 
United  States  as  in  Europe,  but  even  more  cheaply.  The  im- 
proved devices  made  their  way  slowly  or  not  at  all  in  the  rival 
countries;  they  were  adopted  promptly  and  with  full  effect  in 
this  country.  It  has  already  been  noted  that  there  had  not  been , 
even  before  the  war,  any  inferiority  in  cost  for  the  American 
cotton  manufacturers,  as  regards  the  simplest  and  cheapest 
grades  of  goods.  This  position  of  independence  was  strengthened 
by  the  subsequent  improvements,  and  was  extended  to  goods  of 
higher  price  and  quality.  The  change  was  greatest  in  the  weav- 
ing process.  It  was  here  that  the  comparative  advantage  of  the 
manufacture  as  a  whole  was  most  securely  established;  and  the 
special  superiority  in  weaving  served  to  offset  any  lack  of  advan- 
tage in  other  processes. 

On  the  general  situation,  the  Report  of  the  Tariff  Board,  made 
in  191 2,  gave  invaluable  evidence.  So  far  as  concerns  spinning, 
it  is  true,  the  evidence  was  not  entirely  conclusive.  The  figures 
secured  by  the  Board  indicated  that  "  labor  cost,"  i.  e.,  money 
expense  for  labor  per  unit  of  output,  was  slightly  greater  in  the 
United  States  than  in  England.  The  English  labor  cost  on  yarns 
was  found  to  be  lower  than  American  cost,  but  not  much  lower,  — 
78  to  95  per  cent  of  the  American.1     In  other  words,  the  effective- 

1  Tariff  Board  Report  on  Cotton  Manufactures  (191 2),  "  Letter  of  Submittal  " 
(Summary),  p.  9.  Elaborate  figures  are  given  elsewhere  in  the  Report,  pp.  398  seq. 
A  chart  opposite  page  416  shows  the  differences  between  "  labor  costs  "  and  "  total 
conversion  costs."  The  differences  become  progressively  greater  as  the  yarns 
become  finer;   they  are  least  on  the  coarse  yams,  greatest  on  the  fine.     The  phe- 

279 


280         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

ness  of  labor  in  the  United  States,  especially  on  the  lower  counts 
of  yarn,  was  found  to  be  greater,  but  not  quite  so  great  as  to 
offset  the  difference  in  money  wages.  Taken  by  themselves,  the 
figures  would  indicate  that  the  comparative  advantage  of  the 
American  cotton  spinning  industry  almost  measured  up  to 
the  country's  general  standard,  yet  not  quite.  The  data  for 
the  two  countries,  however,  were  not  comparable  without  qualifi- 
cation. The  English  figures  were  for  mule  spun  yarn,  the  Ameri- 
can for  ring  spun  yarn;  and  though  they  were  for  the  same 
counts  (fineness)  of  yarn,  they  were  not  necessarily  for  the  same 
qualities.  A  comparison  made  by  an  unofficial  inquirer  seemed 
to  show  that,  for  ring  spun  yarn  in  the  United  States  compared 
with  ring  spun  yarn  in  Europe,  the  difference  in  labor  cost  was 
virtually  nil,  —  the  effectiveness  of  American  labor  was  so  much 
greater  as  quite  to  offset  the  difference  in  money  wages.1 

For  weaving,  however,  and  for  the  manufacturing  processes  as 
a  whole,  the  Tariff  Board's  conclusions  were  unimpeachable.  The 
effectiveness  of  American  industry  in  weaving  was  so  much 
greater  than  that  in  Europe  as  not  only  to  offset  entirely  the 
difference  in  weavers'  wages,  but  to  leave  a  margin  of  superiority 
which  sufficed  to  offset  also  various  minor  items  in  which  there 
was  no  marked  comparative  advantage.  The  superiority  in 
weaving  was  due  largely  to  the  wide  use  of  the  automatic  loom; 
but  not  solely  to  this.     "  In  the  case  of  plain  looms  the  English 

nomenon  is  in  harmony  with  the  general  trend  in  all  these  comparisons;  it  is  in 
the  finer  and  more  tenuous  qualities  that  the  Americans  show  no  special  effective- 
ness. The  comparison  between  mule  spun  yarns  in  England  and  ring  spun  yarns 
in  the  United  States  was  explained  by  the  Board  on  the  ground  that  mule  spinning 
was  the  prevalent  method  in  the  former  country,  ring  spinning  in  the  latter;  but, 
as  noted  in  the  text,  it  introduces  an  element  of  doubt,  making  the  results  not 
absolutely  comparable. 

1  See  Copeland,  pp.  289,  299.  Ring  spindles  were  found  to  run  a  trifle  faster 
in  the  United  States  than  in  Europe,  —  10,000  revolutions  per  minute  compared 
to  9,000.  A  spinner  in  the  United  States  commonly  had  in  charge  750  to  1,000 
spindles;  in  England  400  to  800;  in  Germany  on  the  average,  500.  There  was  no 
more  breakage  and  interruption  in  the  United  States.  Wages  per  week  were  $6.50 
to  $7.50  in  New  England,  about  $6.00  in  the  South.  In  England  they  were  $3.75 
to  $5.50;  in  Germany,  $3.75  to  $4.25.  Money  wages  thus  seemed  to  vary  almost 
precisely  in  proportion  to  the  effectiveness  of  labor,  i.  e.,  to  the  comparative  advan- 
tage; the  "  labor  cost  "  was  virtually  the  same  in  all  three  countries. 


THE  COTTON  MANUFACTURE  28 1 

weaver  seldom  tends  more  than  four  looms,  while  in  this  country 
a  weaver  rarely  tends  less  than  six,  and  more  frequently  eight, 
or  even  twelve,  if  equipped  with  '  warp-stop  motions.'  .  .  . 
Whereas  the  output  per  spinner  per  hour  in  England  is  probably 
as  great  or  greater  than  in  this  country,1  the  output  per  weaver 
per  hour  is,  upon  a  large  class  of  plain  goods,  less,  and  in  the  case 
where  automatic  looms  are  used  in  this  country  and  plain  looms 
in  England,  very  much  less."  Taking  cost  of  production  as  a 
whole,  "  on  many  plain  fabrics  the  cost  of  production  [i.  e.,  the 
money  cost]  is  not  greater  than  in  England  ";  and  the  American 
prices  of  plain  goods  were  in  no  case  much  above  the  English 
prices,  while  in  the  majority  of  cases  they  were  lower.2 

Taken  as  a  whole,  the  result  plainly  is  that,  so  far  as  concerns 
the  plain  goods  and  goods  of  medium  quality  which  constitute 
the  bulk  of  the  output  of  the  American  mills,  they  have  a  com- 
parative advantage.  They  pay  higher  wages  than  in  England, 
but  the  effectiveness  of  the  industry  as  a  whole  is  such  that  they 
can  yet  turn  out  these  goods  at  as  low  a  price,  if  not  at  a  lower 
price.  To  use  the  phrase  applied  elsewhere  to  this  situation, 
they  measure  up  to  the  general  American  standard  of  effective- 
ness. In  this  case,  as  in  others,  it  must  be  borne  in  mind  that  the 
effectiveness  of  the  industry  depends  not  mainly,  perhaps  not  at 
all,  on  the  skill  and  vigor  of  the  individual  workers;  not  even 
on  those  personal  qualities  in  combination  with  the  tools  and 
machines  on  which  the  operatives  are  put  to  work;  it  depends  on 
the  whole  industrial  outfit,  in  which  ability  for  general  organiza- 
tion is  the  greatest  factor.  As  the  Tariff  Board  stated,  with 
reference  to  weaving,  it  is  a  matter  not  of  individual  superiority 
on  the  part  of  the  American  weaver,  but  of  difference  in  indus- 
trial policy.3 

It  goes  without  saying  that  goods  of  the  classes  to  which  these 
inventions  and  improvements  have  been  applied  were  quite  un- 
affected by  the  high  duties  maintained  until  1913-     They  would 

1  This  general  statement  seems  to  me  not  justified  by  the  Board's  own  figures, 
as  cited  earlier  in  the  text.  It  holds  doubtless  for  some  kinds  of  spinning,  and 
especially  for  the  finer  mule  spun  yarns. 

2  Report,  "  Letter  of  Submittal,"  pp.  11,  13.     See  also  pp.  479  seq. 

3  Report,  p.  12. 


282         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

not  have  been  imported  even  in  the  absence  of  duties.  So  far 
from  being  imported,  they  have  been  exported  steadily  in  con- 
siderable volume,  —  sure  proof  of  established  independence.  The 
exports  of  cotton  goods  began  before  the  civil  war,  and  were  even 
then  no  negligible  item  in  the  total  product.1  The  war,  with 
the  consequent  complete  overturn  of  the  industry  through  a 
decade  or  more,  put  an  end  to  the  exports  for  the  time  being,  and 
it  was  not  until  1880  that  they  rose  to  the  volume  of  the  earlier 
period.  They  increased  rapidly  in  later  years,  and  in  the  first 
decade  of  the  twentieth  century  ranged  from  fifty  to  sixty  millions 
(of  dollars) .  Both  unprinted  goods  and  printed  figure  among  the 
exports.  A  considerable  market  is  found  in  the  Orient,  especially 
for  unbleached  heavy  fabrics  in  northern  China.  The  exports 
show  an  uneven  course,  sometimes  swelling  abruptly  and  then 
shrinking  as  abruptly.  They  present  some  curious  problems, 
much  debated  by  those  to  whom  the  export  trade  seems  peculiarly 
precious.  For  the  purposes  of  the  present  discussion  it  suffices 
to  note  that  the  cotton  manufacture  in  its  largest  branch  reached 
the  stage  not  only  of  superiority  at  home,  but  of  aggressiveness 
abroad.2 

Still  another  indication  of  strength  and  superiority  is  found  in 
the  conditions  of  supply  for  the  machinery  used.  As  has  been 
elsewhere  stated  3  the  source  of  the  machinery  is  a  significant  clue 
to  the  position  of  an  industry  as  a  whole.  If  the  machinery  is 
not  only  made  within  the  country,  but  made  on  native  models 
and  with  native  improvements;  still  more,  if  it  has  reached  that 
stage  of  excellence  that  it  is  sought  for  export  abroad,  —  then 
we  have  strong  evidence  of  superiority.  Precisely  this  sort  of 
evidence  is  found  for  the  cotton  manufacture.  In  both  of  the 
dominant  departments  of  the  manufacture,  spinning  and  weaving, 
American  machinery,  as  it  has  been  improved  for  the  manufac- 
ture of  the  cheap  and  medium  goods,  has  come  to  be  exported. 

1  The  exports  in  1850-60  ranged  from  $7,000,000  to  $10,000,000;  the  census 
reported  the  total  value  of  the  domestic  product  (manufactures  of  cotton)  as 
$62,000,000  in  1850,  $116,000,000  in  i860. 

2  An  excellent  analysis  of  the  export  trade  in  cotton  goods  is  in  Copeland, 
chapter  xii. 

3  In  chapter  xvi,  above,  p.  251. 


THE  COTTON  MANUFACTURE  283 

The  "  Rabbeth  "  spindle,  the  most  widely  used  of  the  American 
ring  spindles,  was  early  sent  abroad.1  The  automatic  loom  has 
been  sent  abroad  on  a  considerable  scale,  and  a  foreign  market 
for  it  systematically  cultivated.  What  is  not  less  significant, 
it  has  been  copied  by  foreign  makers  of  machinery,  especially 
in  Germany;  a  form  of  tribute  which  naturally  is  irritating  to 
the  American  pioneers,  but  is  not  the  less  conclusive  evidence  of 
their  originality  and  leadership.2 

The  automatic  loom,  however,  has  not  come  into  large  use 
either  in  England  or  on  the  Continent.  Various  causes  have  pre- 
vented its  wide  adoption;  causes  partly  technical  in  the  strict 
sense,  partly  related  to  the  general  industrial  environment. 
Among  the  technical  obstacles  is  the  circumstance  that  in  Eng- 
land, still  the  most  important  competitor,  the  automatic  loom 
does  not  work  to  full  advantage  for  goods  heavily  "  sized,"  i.  e., 
much  weighted  with  starch.  This  heavy  weighting,  common 
for  the  cheap  English  fabrics  made  for  export  to  the  Orient,  has 
often  been  condemned  as  a  kind  of  dishonest  adulteration;  it 
seems  to  be  in  fact  an  adaptation  of  the  goods  to  the  preferences 
and  purses  of  the  customers.3  But  it  does  bring  difficulties  in 
the  way  of  using  the  mechanism  of  the  automatic  loom,  and  thus 
impedes  the  spread  of  that  improvement.  Among  obstacles 
from  the  environment,  in  all  European  countries,  is  the  absence 
of  that  concentration  of  work  on  large  orders  which  character- 
izes American  business  and  gives  scope  to  the  special  industrial 
talents  of  the  Americans.  The  European  manufacturer,  in 
England  and  even  more  on  the  Continent,  accepts  willingly  and 
habitually  small  or  moderate  orders,  and  prefers  a  system  and 
an  equipment  which  makes  it  easy  to  shift  from  one  order  to 
another  and  different  one.  The  American  aims  to  turn  out 
large  quantities  of  a  single  product,  reducing  to  a  minimum  the 
readjustments  of  the  labor  force,  and  bringing  to  a  maximum  the 
efficiency  of  all  labor-saving  devices.      The  automatic  loom  fits 

1  W.  F.  Draper's  paper  in  Transactions,  American  Cotton  Manufacturers'  Associa- 
tion, no.  50  (1891),  p.  41. 

2  For  some  reference  to  the  German  automatic  looms,  see  the  article  by  Dr. 
Copeland,  Quarterly  Journal  of  Economics,  vol.  xxv,  p.  747. 

3  See  Copeland,  p.  79. 


284         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

into  the  prevailing  American  practices;  it  does  not  fit  into  the 
prevailing  European  practices.1 

A  different  obstacle,  the  force  of  which  is  not  easy  to  estimate, 
but  which  beyond  question  is  strong  in  England,  is  the  attitude 
of  the  labor  organizations.     A  well-informed  observer  has  written 
to  me  in  so  many  words  that  "  in  England  the  cotton  weavers 
are  thoroughly  organized,  and  the  union  will  not  permit  the  Eng- 
lish weavers  to  operate  more  than  four  looms  each,  and  will  not 
permit  the  use  of  the  automatic  looms."  2     This  perhaps  is  put 
too  strongly ;  but  it  has  a  large  basis  of  truth.     Even  for  ordinary 
looms  the  English  weavers  oppose  rearrangements  and  reductions 
in  piece  rates  when  improvements  make  it  possible  for  a  weaver 
to  operate  with  the  same  effort  and  attention  a  larger  number 
of  looms.     Hence,  as  was  noted  a  moment  ago,  the  effectiveness 
of  labor  is  less  in  England  even  where  power  looms  of  the  same 
general  type  as  in  the  United  States  are  used.     This  difficulty  is 
accentuated  in  the  attitude  of  the  English  weavers  toward  the 
automatic  loom.     The  weavers  are  afraid  of  the  new  device; 
it  threatens  to  make  employment  less.     They  are  not  disposed 
to  work  the  looms  to  their  maximum  output;  they  are  loth  to 
accept  reduced  piece-work  rates,  even  though  .they  can  earn  as 
much,  even  more.     It  is  the  familiar  and  almost  inevitable  dis- 
position to  "  make  work,"  the  hostility  to  labor-saving  appliances. 
It  may  not  take  the  form  of  overt  and  unqualified  refusal  (as  was 
stated  in  the  letter  just  quoted),  but  it  leads  to  a  silent,  stolid 
opposition.     Against  this  the  employer  cannot  make  headway 
without  friction  and  loss,  expecially  when  his  power  of  discharge 
and  his  ability  to  insist  on  the  full  productivity  of  machinery  are 
hampered  by  a  strong  labor  union.      The  same  situation  has 
already  been  considered  with  reference  to  the  iron  industry,  and 

1  Copeland,  pp.  320-326,  for  some  interesting  figures  and  comments.  For  Swit- 
zerland, I  find  it  stated  (in  19 11)  that  the  "  great  technical  novelty,  the  Northrop 
loom,  though  introduced  finds  its  way  into  use  very  slowly  ...  it  is  adapted  to 
the  mass  production  of  simple  goods,  but  not  to  the  Swiss  industry,  which  is 
mobile  and  subject  to  great  changes  in  detail;  it  is  least  adapted  to  fine  or  fancy 
fabrics."      Reichesberg,  Handworterbuch  der  Schweizerischen  V olkswirtschaft,  vol. 

Hi,  p.  895. 

2  I  quote  from  a  private  letter,  written  by  a  person  highly  conversant  with  the 
American  industry,  who  had  also  made  inquiries  on  the  spot  in  England. 


THE  COTTON  MANUFACTURE  285 

the  same  perplexities  must  be  admitted.1  The  labor  union  move- 
ment has  it  good  sides  and  its  bad  sides.  Indispensable  as  it 
doubtless  is  for  securing  to  the  workmen  a  "  fair  "  share  in  the 
gains  from  material  progress,  the  dispassionate  observer  must 
face  the  fact  that  it  leads  them  often  to  put  checks  on  that  very 
progress.  For  all  the  exaggeration  in  the  statements  that  Eng- 
lish unionism  has  sounded  the  death-knell  to  English  industrial 
leadership,  it  remains  true  that  the  absence  of  firmly  entrenched 
unions  in  the  cotton  and  iron  manufactures  has  facilitated  the 
march  of  improvement  in  the  United  States. 

The  endeavors  of  the  American  makers  of  automatic  looms  and 
of  other  machinery  to  develop  an  export  business  and  to  secure 
the  adoption  of  their  devices  in  foreign  countries,  have  led  to 
gloomy  forebodings.  Similar  alarm  has  been  expressed  under 
the  analogous  conditions  in  the  machine  tool  trade.2  What  will 
happen,  it  is  asked,  when  the  foreigners  are  equipped  with  our 
very  best  machinery,  and  can  still  secure  operatives  at  much 
lower  wages  to  work  that  very  machinery  ?  Will  not  the  Ameri- 
can manufacturer,  compelled  to  pay  wages  at  the  higher  rates  of 
this  country,  be  inevitably  forced  out  of  the  field  ?  The  theoretic 
aspects  of  this  question  have  already  been  considered  in  the 
introductory  chapters  of  the  present  volume.3  The  history  of 
the  automatic  loom,  its  rapid  adoption  in  the  United  States,  its 
slow  progress  in  England  and  on  the  Continent,  its  prompt 
utilization  to  full  capacity  here,  its  halting  utilization  in  the 
rival  countries,  the  restless  and  unflagging  march  of  improve- 
ment in  the  originating  people,  —  these  circumstances  all  tend 
to  confirm  what  was  there  said.  The  comparative  advantage 
now  possessed  in  the  United  States  does  not  seem  in  danger  of 
being  lost  at  any  period  about  which  its  people  need  have  present 
concern.  What  will  happen  in  the  more  distant  future,  it  would 
be  rash  to  predict.  The  time  may  come  when  all  the  advanced 
civilized  countries  will  have  the  same  equipment  in  their  major 
manufacturing  industries,  and  the  same  organization;   the  same 

1  Cf.  what  was  said  in  chapter  xii,  p.  185,  of  the  similar  attitude  of  the  English 
tin  plate  workers. 

2  See  chapter  xiii,  pp.  197  seq.  3  See  chapter  iii,  pp.  44  seq.,  above. 


286         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 


enterprise,  ingenuity,  skill,  among  both  the  leaders  of  business, 
and  the  rank  and  file.  Then  their  social  and  industrial  condi- 
tions will  be  equalized,  wages  will  be  on  the  same  plane  through- 
out, and  trade  between  them  will  be  restricted  to  a  much  narrower 
volume  than  now.  But  that  time,  if  it  ever  is  to  come,  is  at  all 
events  long  distant.  Such  differences  as  the  present  case  illus- 
trates seem  likely  to  persist  for  a  long  time;  as  long  a  time  as  a 
country  need  wisely  consider  in  shaping  its  commercial  policy. 
American  enterprise  and  ingenuity  will  continue  to  find  oppor- 
tunities in  which  these  qualities  tell  to  the  utmost,  a  comparative 
advantage  will  persist  in  the  congenial  industries,  the  inter- 
national division  of  labor  will  be  affected  by  the  same  forces  that 
have  operated  in  the  past  and  operate  in  the  present. 

One  further  phase  of  the  American  development  of  machinery 
has  been  illustrated  in  the  cotton  manufacture  as  well  as  in  the 
silk  manufacture.1  I  refer  to  the  utilization,  —  one  should  hesi- 
tate to  use  the  condemnatory  term  exploitation,  —  of  a  great 
stratum  of  cheap  labor.  Not  only  has  the  influx  of  immigrant 
labor  been  turned  to  account  in  the  north,  but  in  the  south  the 
supply  of  cheap  native  labor.  The  growth  of  the  cotton  manu- 
facture in  the  south  since  1880  has  rested  chiefly  on  the  discovery 
of  the  possibility  of  using  in  the  mills  the  ignorant  rural  whites, 
previously  half-idle.  Wages  were  low  at  the  start  and  the 
quality  of  labor  was  low;  both  rose  as  time  went  on;  yet  in 
neither  regard  does  the  northern  level  seem  to  have  been  quite 
reached.  Lamentable  as  have  been  some  of  the  concomitants  of 
this  development,  —  long  hours,  child  labor,  low  wages,  —  it 
stands  for  a  stage  in  progress  toward  better  things;  as  indeed  is 
the  case  with  the  immigrants  in  the  cotton  mills  of  the  north. 
At  all  events,  alike  in  north  and  south,  the  cheap  labor  was 
turned  to  account  in  those  branches  of  the  industry  in  which 
machinery  had  been  brought  most  completely  to  the  automatic 
stage.2 


1  See  chapter  xiv,  pp.  232  seq. 

2  A  good  indication  is  given  by  the  exclusive  use  of  ring  spindles  in  the  south, 
see  the  figures  given  in  the  preceding  chapter.  Ring  spindles,  it  will  be  recalled, 
can  be  operated  by  young  girls,  mule  spindles  by  men  only. 


THE  COTTON  MANUFACTURE  287 

It  would  not  be  easy  to  say  which  was  cause  and  which  effect; 
whether  the  character  of  the  labor  supply  caused  the  development 
of  machinery  adapted  to  it,  or  whether  the  development  of  the 
machinery  led  to  the  utilization  of  the  labor  supply.  Probably 
there  was  an  interaction.  The  attention  of  inventors  and  manu- 
facturers was  naturally  turned  toward  adapting  the  machines  to 
the  labor  available  for  this  particular  industry;  at  the  same  time 
the  general  industrial  trend  in  the  United  States  was  toward 
automatic  labor-saving  devices.  What  would  have  been  the 
course  of  invention  in  the  cotton  manufacture  if  the  labor  supply 
had  been  of  a  different  and  higher  quality  must  be  an  open  ques- 
tion. In  other  industries,  such  as  the  boot  and  shoe  manufac- 
ture and  the  machine  making  trades,  there  has  been  no  lack  of 
advance  in  machinery  adapted  to  operatives  more  intelligent  and 
more  alert.  Given  the  conditions  obtaining  in  the  textile  indus- 
tries, the  advances  were  most  striking  where  profits  could  be  made 
by  utilizing  the  existing  supplies  of  low-grade  labor. 

The  development  of  the  cotton  manufacture,  again,  illustrates 
how  greatly  the  effectiveness  of  industry  is  influenced  by  indus- 
trial leadership.  Repeatedly  one  hears  it  stated  that  the  effi- 
ciency of  labor  is  no  greater  in  American  textile  mills  than  in 
European;  nay,  it  is  said,  the  European  manufacturer  has  opera- 
tives who  are  more  skilful  and  better  trained,  not  less  so.  And 
yet,  in  such  branches  of  the  textile  manufacture  as  have  been 
considered  in  the  preceding  pages,  the  effectiveness  of  labor  as  a 
whole  is  greater  than  in  Europe.  It  is  greater,  not  because  the 
operatives  are  of  better  quality,  but  because  they  are  put  to  work 
on  more  highly  developed  machinery,  and  are  organized  and 
guided  better.  The  cause  of  superiority  is  to  be  found  mainly 
in  the  inventors  and  mill  managers.  Where  the  machines  and 
tools  are  the  same  in  the  United  States  as  in  Europe,  there  is  not 
necessarily,  perhaps  not  usually,  an  advantage.  When  some 
special  sort  of  artisan's  work  is  required,  there  may  even  be  a 
positive  inferiority  among  the  Americans.  True,  barring  these 
cases  of  special  handicraft  skill,  there  is  probably  some  degree  of 
higher  efficiency  in  the  United  States,  due  to  the  general  in- 
dustrial environment.     The  pace  is  faster  throughout;  exertion 


288         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

is  more  continuous  and  more  strenuous.  The  American  weaver 
tends  more  looms  even  of  the  ordinary  type  than  the  English; 
the  American  girl  tends  more  ring  spindles  than  the  German. 
But  this  sort  of  efficiency  is  itself  dependent  on  the  management 
and  the  oversight  of  the  leaders.  It  is  dependent  on  the  appro- 
priate arrangement  of  tools  and  of  plant,  and  it  is  almost  always 
supplemented  by  labor-saving  machinery.  In  common  pick  and 
shovel  work,  no  one  can  see  the  American  apparatus  for  sewer 
construction  or  rough  railway  work  without  observing  the  combi- 
nation of  labor-saving  plant  with  management  that  drives  the 
labor  at  full  speed. 

I  need  hardly  repeat  what  I  have  already  said  on  the  larger 
social  aspects  of  this  problem.  Driving  at  speed  has  its  evil  sides 
as  well  as  its  good.  The  just  mean  is  not  easy  to  strike  between 
the  pace  that  wears  the  laborer  out  at  fifty  and  the  slack  and 
irritating  gait  of  the  work-making  trade-unionist;  nor  is  it  easy 
to  say  which  extreme  most  kills  the  intrinsic  satisfaction  from 
well-directed  activity.  The  ideal  doubtless  would  be  alert  and 
strenuous  labor  for  so  long  a  working  day  as  can  be  steadily  main- 
tained without  irrecoverable  fatigue  or  a  premature  old  age.  A 
concomitant  of  the  American  practice  should  be  a  shortening  of 
the  working  day,  and  with  it  the  wise  restriction  of  the  labor  of 
women  and  children.  In  no  country  is  there  more  solid  ground 
for  welcoming  the  eight-hour  system.  Oddly  enough,  the 
shortened  working  day  obtains  much  more  in  Great  Britain, 
where  the  pace  is  slacker.  These  aspects  of  the  question  are 
not  to  be  overlooked,  even  though  they  He  apart  from  the  main 
subjects  of  the  present  inquiry. 


Compare  now  the  general  situation  for  ordinary  cottons,  as 
described  in  the  preceding  pages,  with  that  for  the  more  expensive 
grades.  We  find  a  contrast,  accentuated  as  the  goods  become 
finer.  Imports  of  these  did  not  cease  during  the  period  from  1883 
to  1913,  notwithstanding  the  successive  increases  of  duty  made 
in  the  tariff  acts  of  1883,  1890,  1897,  and  1909.  Foreign  supplies 
of  fine  goods,  though  checked  by  the  high  duties,  continued  to 
come  in.     The  domestic  manufacturers  insisted  that  they  could 


THE  COTTON  MANUFACTURE  289 

not  turn  out  these  goods  unless  aided  by  high  duties;  and  they 
urged  the  "  acquisition  "  of  the  new  industries  through  greater 
protection.  The  reduction  of  duties  in  the  tariff  act  of  19 13, 
accepted  almost  with  indifference  by  the  makers  of  the  cheaper 
grades,  was  the  cause  of  grave  forebodings  among  those  of  the 

finer. 

One  aspect  of  the  contrast  between  the  different  branches  of 
the  industry  appears  in  the  relation  between  imported  and  home- 
made machinery.  In  the  note 1  are  given  figures  collected  by 
the  Tariff  Board,  not  indeed  for  the  whole  cotton  manufacture, 
but  for  a  number  of  establishments  large  enough  to  indicate  the 
general  situation.  So  far  as  weaving  goes,  the  situation  is  obvi- 
ously one  of  independence;  we  have  seen  that  it  is  even  more,  — 
one  of  superiority.  Weaving  affords  a  favorable  field  for  Ameri- 
can industrial  talent.  Not  only  as  regards  the  new  automatic 
looms,  but  as  regards  the  older  and  more  familiar  power  looms, 
the  American  has  nothing  to  learn  from  the  foreigner,  and  usu- 
ally something  to  teach.  All  the  ring  spindles  also  are  domestic 
built.  The  carding  machinery  is  again  predominantly  domestic; 
and  the  same  is  the  case  with  the  "  jack  "  spindles.  On  the 
other  hand,  much  the  larger  part  of  the  mule  spindles  are  im- 
ported. 

Let  it  be  recalled  that  mule  spindles  are  adapted  for  the  finer 
counts  of  yarn,  and  are  the  only  ones  that  can  be  used  for  the 
finest  counts.  The  jack  spindles,  for  which  figures  are  given,  serve 
also  for  fine  yarns.     That  the  mule  spindles  are  chiefly  foreign 

1  Per  cent  of  Foreign  Built  Machinery  in  American  Mills 

Spinning  Spindles 

Cards  Jack  Spindles  Ring  Mule  Looms 

No.    Per  cent       No.     Per  cent       No.    Per  cent     No.    Per  cent      No.    Per  cent 


Domestic 11,200     83.7       510,000     85.8     4,000,000   go.o     119,000     16.9       127,000    99.7 

Foreign    2,182      16.3         84,000     14.2  3.000       .1     584,000    83.1  300        .3 

Report  of  Tariff  Board,  on  Cotton  Manufactures,  p.  473.  The  figures  are  for  "  the 
mills  from  which  such  data  were  obtained  ";  by  no  means  all  of  the  American 
mills,  but  representative  of  the  whole. 

Jack  spindles  (also  called  "  fine  roving  spindles  ")  are  used  where  fine  yarn  is 
to  be  spun  from  sea  island  and  other  long  fibre  cotton;  they  make  the  roving 
(attenuated  sliver)  fine  enough  for  spinning  high  counts  of  yarn.  They  are  roving 
spindles,  not  spinning  spindles. 


290         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

built, — which  means,  British  built, — does  not  necessarily  indicate 
an  absolute  inferiority  in  the  effectiveness  of  American  industry. 
It  points  to  the  lack  of  superiority,  the  lack  of  a  comparative 
advantage.  Using  the  same  machines,  and  having  operatives  no 
more  skilful  or  efficient,  —  nay,  it  is  stoutly  maintained,  opera- 
tives less  skilful,  —  the  American  spinners  of  fine  yarns  cannot 
pay  higher  wages  than  British  competitors  and  hold  their  own 
without  tariff  support.  So  far  as  weaving  goes,  the  makers  of 
fine  fabrics  would  seem  at  the  least  to  be  at  no  absolute  dis- 
advantage. It  is  true  that  automatic  looms  cannot  be  used  for 
very  fine  goods ;  it  is  true  also  that  even  with  ordinary  looms  the 
weaver  cannot  take  care  of  so  large  a  number  as  when  coarse  goods 
are  made.  I  judge  that,  on  the  whole,  there  is  some  superiority 
in  weaving  fine  goods,  though  by  no  means  so  marked  a  superi- 
ority as  in  coarse  and  medium  goods.1  In  spinning,  however,  if 
the  statements  of  the  manufacturers  themselves  are  to  be  accepted, 
there  is  a  distinct  inferiority;  and  even  if  allowance  is  made  for 
the  habitual  exaggerations  of  protected  producers,  there  remains 
little  indication  of  any  comparative  advantage.  In  the  manu- 
facture of  the  expensive  cotton  fabrics  as  a  whole  the  characteris- 
tic industrial  aptitudes  of  the  Yankee  find  no  favorable  field. 

It  is  not  easy  to  give  a  single  general  reason  why  the  English 
maintain  their  undoubted  supremacy  as  manufacturers  of  the 
finest  yarns,  and  on  the  whole  of  the  finest  woven  fabrics  also. 
Something  was  due  at  the  outset  to  the  damp  and  equable  climate 
of  Lancashire.  This  may  still  be  a  factor,  though  in  modern 
times  one  of  much  lessened  consequence,  since  ways  have  been 
found  of  humidifying  the  mills  artificially  at  slight  expense. 
Special  skill  among  the  operatives  is  often  alleged.     The  class  of 

1  The  Tariff  Board  (Report,  p.  11),  after  explaining  that  with  plain  looms, 
whether  ordinary  or  automatic,  the  output  per  weaver  per  hour  is  greater  in  the 
United  States,  remarks:  "  In  the  case  of  other  methods  of  weaving,  such  as  dobby, 
Jacquard,  box  dobby,  box  Jacquard,  lappet,  etc.,  the  difference  in  output  is  by  no 
means  so  great.  In  the  case  of  dobby  looms  (without  automatic  attachment)  on 
some  classes  of  fabric,  the  American  weaver  will  tend  eight  or  more  looms  against 
four  in  England;  but  with  the  more  complicated  weaves  the  ratio  seems  to  be  nearer 
that  of  six  to  four,  and  in  the  case  of  certain  fancy  fabrics,  where  the  number  of 
looms  tended  is  necessarily  four  or  less,  the  output  per  weaver  is  about  the  same 
in  both  countries." 


THE  COTTON  MANUFACTURE  29 1 

factory  workpeople  in  Lancashire  is  stable.  Children  succeed  their 
parents  in  the  mills;  they  do  not  often  strive  to  rise  in  the  indus- 
trial scale,  as  is  commonly  the  case  in  the  United  S  tates.  Something 
like  handicraft  skill  is  said  to  be  transmitted  from  genera- 
tion to  generation.1  It  is  probably  true  that,  so  far  as  the  spinning 
staff  goes,  the  American  manufacturers  are  right  in  maintaining 
that  they  have  operatives  less  efficient,  not  more  so.  Another 
factor  is  the  extreme  specialization  of  the  cotton  industry  in  Great 
Britain.  Not  only  are  weaving  and  spinning  commonly  sepa- 
rated, —  to  this,  as  already  noted,2  the  technical  characteristics  of 
mule  spinning  contribute,  —  but  the  spinning  of  the  different 
counts,  and  the  various  finishing  processes,  such  as  bleaching, 
dyeing  and  printing,  are  carried  on  in  independent  establishments. 
With  this  more  highly  elaborated  partition  of  labor  between 
establishments  goes  a  great  specialization  in  fabrics.  In  the 
nature  of  the  case,  the  finer  goods  cannot  be  produced  in  great 
quantities;  no  large  supplies  of  any  one  pattern  and  grade  are 
called  for.  An  industry  concentrated  in  a  small  district,  split  up 
into  multitudes  of  differentiated  establishments,  with  a  trained 
and  mobile  labor  supply,  is  adapted  to  such  a  product.  The  case 
is  one  (in  Professor  Marshall's  phrase)  of  marked  external  econ- 
omies. Not  improbably,  it  is  also  one  of  adaptation  to  national 
bent  and  talent.  At  all  events,  a  superiority  in  the  manufacture 
of  the  finer  goods,  and  especially  of  the  finer  yarns,  Great  Britain 
does  possess;  as  is  shown  not  only  by  the  exports  to  the  United 
States  in  face  of  high  duties,  but  by  the  continued  exports  to  the 
Continent.  To  quote  a  phrase  of  Adam  Smith's,  "  whether  the 
advantages  which  one  country  has  over  another  be  natural  or 
acquired,  is  in  this  respect  of  no  consequence.  As  long  as  the 
one  country  has  those  advantages,  and  the  other  wants  them,  it 
will  always  be  more  advantageous  for  the  latter,  rather  to  buy 
of  the  former  than  to  make."  3  The  acquired  advantage  has  per- 
sisted long  in  England  for  this  particular  industry  and  bids  fair 
to  persist  long  in  the  future. 

1  Cf.  the  statement  regarding  mule  spinning,  quoted  in  chapter  xvii,  p.  271. 

2  Chapter  xvii,  p.  271. 

3  Wealth  of  Nations,  Book  IV,  chapter  ii  (vol.  i,  p.  423  of  Cannan's  edition). 


292         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

The  usual  explanation,  among  manufacturers  and  technical 
writers,  of  the  exceptional  position  of  the  finer  goods,  is  that  the 
question  is  simply  one  of  labor.  More  labor,  we  are  told,  is  re- 
quired for  the  finer  goods;  the  wages  bill  forms  a  larger  item  in 
the  expenses  of  production,  the  raw  material  a  smaller  one;  hence 
the  American  producer  is  handicapped  in  special  degree  by  the 
higher  scale  of  wages  in  the  United  States.  The  business  men 
who  argue  in  this  way  have  in  mind,  as  such  persons  almost  always 
do,  the  field  with  which  alone  they  are  conversant,  and  generalize 
at  once  from  their  own  experiences.  Only  in  the  rarest  of  in- 
stances do  they  consider  the  problem  as  a  whole.  They  do  not 
reflect  that  in  other  industries,  such  as  the  manufacture  of  boots 
and  shoes  and  of  machine  tools,  raw  material  is  no  important 
item  in  the  expenses,  direct  labor  is  a  great  item;  yet  here  the 
Americans  easily  hold  their  own  and  even  export.  What  remains 
true  throughout  is  that  high  wages  constitute  no  insuperable 
obstacle  for  the  American  producer  if  all  the  labor  is  effective,  — 
that  applied  to  the  operation  of  machinery  as  well  as  that  applied 
to  its  construction.  It  is  not  the  mere  use  of  machines  that 
enables  high  wages  to  be  paid  and  a  product  nevertheless 
turned  out  at  low  cost;  it  is  the  fact  that  the  machines  are  well 
devised  and  well  run.  Wherever  there  is  no  favorable  oppor- 
tunity for  introducing  labor-saving  methods,  high  wages  cannot 
be  paid  unless  there  be  high  prices  for  the  goods;  and  with 
prices  high,  foreign  competitors  who  pay  low  wages  cannot  be 
met  on  even  terms.      Tariff  support  is  then  needed. 

Precisely  in  what  industries  the  favorable  opportunity  exists 
cannot  safely  be  predicted  in  advance.  In  the  case  of  the  silk 
manufacture  an  unexpected  field  was  found,  or  at  least  seems 
to  be  in  process  of  finding.  In  the  case  of  the  finer  cottons,  — 
and  it  will  be  seen  that  the  case  of  finer  woolens  is  similar,  —  no 
such  favoring  conditions  have  yet  appeared.  And  the  nature  of 
these  branches  of  industry  seems  to  indicate  that  they  are  not 
likely  to  appear.  A  considerable  standardization  is  essential  for 
the  successful  application  of  machine  methods.  The  mere  fact 
that  raw  material  is  a  large  item  in  the  expenses  of  production 
does  not  make  possible  such  standardization;  it  may  be  feasible 


THE  COTTON  MANUFACTURE  293 

where  raw  material  plays  a  large  part,  as  with  ordinary  cottons, 
or  where  it  plays  a  small  part,  as  with  machine  tools  or  sewing 
machines.  But  a  need  of  individual  attention  to  each  product 
or  pattern,  or  of  handicraft  skill  trained  for  the  particular  trade, 
constitutes  an  obstacle  for  the  American  employer.  Under  these 
conditions  he  works  with  no  superior  effectiveness.  The  obstacles 
seem  to  be  found  insuperably  in  the  finer  grades  of  all  the  textile 
fabrics;  they  explain  the  striking  contrast  between  the  manufac- 
ture of  the  cheap  and  medium  grades  of  cotton  goods  and  that 
of  the  finer  grades. 

One  topic,  referred  to  in  the  earlier  part  of  this  chapter,  remains 
to  be  considered.  The  manufacture  of  all  but  the  finest  grades 
of  cottons  has  had  protection  even  to  the  point  of  prohibition. 
Is  there  any  indication  that  this  extreme  of  government  support 
had  deadened  progress  ? 

The  tale  told  in  the  preceding  pages  gives  an  unequivocal 
answer:  no.  The  cotton  manufacture,  so  far  from  giving  any 
evidence  of  a  slackened  pace,  has  shown  striking  advances. 
Whatever  may  have  been  the  influence  of  protection,  it  has  not 
been  enfeebling.  The  case  is  clear  beyond  cavil  as  regards  the 
staple  goods  which  occupy  the  bulk  of  the  industry.  If  in  the 
manufacture  of  finer  goods  there  has  been  imitation  of  foreign 
exemplars  and  appearance  of  backwardness,  the  explanation  is  to 
be  found  not  in  any  lack  of  enterprise  or  vigor  among  the  Ameri- 
can producers,  but  in  the  fact  that  the  field  was  unfavorable. 

To  generalize  from  this  instance  would  be  rash.  A  case  of  the 
opposite  kind,  —  lack  of  progress  under  a  rigid  protective  system, 
—  seems  to  be  discernible  in  some  branches  of  the  woolen  manu- 
facture; 1  and  beyond  question  still  others  could  be  adduced.  But 
on  the  whole  the  evidence  is  that,  in  the  United  States  at  least, 
high  protection  has  not  been  inconsistent  with  enterprise,  inven- 
tion, forging  ahead.  There  is  ground,  on  the  contrary,  for  say- 
ing that  it  has  in  some  degree  contributed  to  such  progress. 
What  has  been  set  forth  in  the  preceding  pages  of  the  develop- 
ment of  the  iron  and  silk  industries  points  that  way.  It  would 
be  going  quite  too  far  to  say  that  the  protective  system  has  been 

1  See  chapter  xxi,  p.  353. 


294        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

the  main  cause  of  the  advance  in  organization  and  in  technical 
equipment  which  has  appeared  in  so  many  American  industries 
and  in  the  cotton  manufacture  among  them.  The  general  sweep 
of  the  country's  industrial  movement,  —  the  vast  resources 
waiting  to  be  exploited  by  an  enterprising  people,  the  keen  atmos- 
phere of  democracy,  the  free  scope  for  every  talent,  the  concen- 
tration on  money  making  and  wealth  producing  of  the  enormous 
influence  of  social  emulation,  —  here  are  underlying  forces  much 
more  powerful.  But  it  is  not  to  be  denied  that  these  forces  have 
been  directed  by  protection  into  some  fields  which  they  might  not 
otherwise  have  touched,  and  in  which  they  have  operated  with 
effects  similar  to  those  wrought  in  American  industry  at  large. 

On  the  other  hand,  it  can  hardly  be  maintained  that  anything 
in  the  nature  of  protection  to  young  industries  has  been  applied 
with  good  effect  in  the  particular  case  here  under  consideration,  — 
the  cotton  manufacture.  What  has  been  accomplished  for  the 
industry  during  its  stage  of  trial  was  accomplished  in  the  first 
third  of  the  nineteenth  century,  when  the  industry  was  really 
young.  Thereafter,  so  far  as  its  staple  branches  were  concerned, 
it  grew  and  prospered  without  danger  from  foreign  competitors  or 
need  of  support  against  them.  Even  before  the  civil  war,  still 
more  after  it,  whether  duties  were  moderate  or  were  extreme, 
the  development  of  these  branches  was  affected  by  the  domestic 
surroundings  alone.  A  field  favorable  for  the  talents  of  the 
Yankee,  a  great  population  ready  to  purchase  staple  goods  by  the 
million,  a  labor  supply  adapted  for  the  utilization  of  quasi-auto- 
matic machines,  —  here  we  have  the  explanation  of  the  progress 
made  in  the  industry,  with  no  discernible  influence  either  favorable 
or  unfavorable  from  the  tariff  system. 

Another  suggestion  has  been  made:  that  the  manufacture  of 
cotton  machinery,  both  for  spinning  and  weaving,  has  been  pro- 
moted by  the  duties  not  so  much  on  the  goods  as  on  the  ma- 
chinery; with  the  effects  of  successful  protection  to  a  young 
industry.1     The  case  seems  to  me  at  least  doubtful.     The  manu- 

1  This  is  maintained,  —  though  without  the  use  of  the  phrase  "  young  indus- 
tries," —  by  W.  F.  Draper,  in  the  paper  on  the  development  of  spinning  machinery 
already  cited;  Transactions  New  England  Cotton  Manufacturers'  Association,  no.  50. 


THE  COTTON  MANUFACTURE  295 

facture  of  textile  machinery  began  in  the  United  States  as  early 
as  the  textile  industries  themselves.  Both  in  spinning  and  weav- 
ing, independent  progress  was  made  before  the  war  brought  in 
the  regime  of  extremely  high  duties.  The  same  general  causes 
which  stimulated  the  invention  of  labor-saving  machinery  in 
other  industries  brought  about  their  consequences  in  this  field  also. 
The  patent  system  may  be  adduced  among  the  favoring  factors 
with  much  more  plausibility  than  the  tariff  system.  The  whole 
spirit  of  industrial  leadership  has  been  toward  precisely  the  sort  of 
mechanical  progress  which  the  textile  inventions  have  illustrated. 
The  inventors  and  business  men  who  ascribe  their  successes  to 
protection  fail  to  give  due  credit  to  themselves. 

The  general  conclusions  to  be  derived  from  this  inquiry  on  the 
cotton  manufacture  have  been  sufficiently  indicated  in  the  pre- 
ceding pages.  In  its  staple  branches  the  industry  possesses 
advantages;  it  measures  up  to  the  general  American  standard  of 
effectiveness.  It  can  pay  wages  higher  than  those  in  competitive 
industries  abroad,  and  yet  sell  its  products  as  cheaply.  It  needs 
no  tariff  support.  But  for  the  finer  grades  of  goods,  and  for 
many  specialties,  the  situation  is  different;  here  there  has  not 
yet  been  a  comparative  advantage,  nor  does  there  seem  to  be  a 
prospect  of  competing  with  the  foreigner  on  even  terms  in  the 
future.  The  staple  branches  alone  seem  to  offer  good  oppor- 
tunities for  the  characteristic  industrial  qualities  of  the  American 
inventor  and  business  man.  The  course  of  development  in  the 
industry,  both  in  its  successes  and  its  failures,  serves  as  an  illus- 
tration of  the  principle  of  comparative  effectiveness. 


CHAPTER  XIX 
WOOL 

Before  proceeding  to  the  woolen  manufacture,  the  third  among 
the  great  textile  industries,  something  must  be  said  of  wool  and 
the  duties  on  wool.  The  woolen  manufacture  has  differed  from 
that  of  silks  and  cottons  in  at  least  one  important  respect:  through 
almost  the  entire  period  covered  in  the  present  inquiry,  its  raw 
material  has  been  subject  to  duties.  The  influence  of  the  tariff 
system  on  the  industry  has  thus  been  complicated  by  the  fact 
that  wool  itself  has  been  affected.  There  are  independent  rea- 
sons for  examining  the  development  of  wool  production  and  im- 
ports; the  working  of  the  duties  here  also  serves  to  illustrate 
general  principles.  The  present  chapter  accordingly  will  be 
given  to  a  consideration  of  this  part  of  the  protective  system.1 

In  the  tariff  acts  from  1867  to  1909  (neglecting  for  a  moment 
the  brief  period  of  free  admission  from  1894  to  1897)  wool  was 
divided  into  three  classes:  clothing  wool,  combing  wool,  carpet 
wool.  For  reasons  which  will  be  indicated  below,  the  first  two 
classes  may  be  thrown  together;  though  distinguished  in  the 
tariff,  they  are  to  be  treated  as  one  for  trade  purposes.  More- 
over, these  two  classes  were  subjected  to  nearly  the  same  rates 
of  duty,  and  rates  which  remained  nearly  constant  in  the  several 
protectionist  tariffs.  The  details  of  the  changes  in  the  successive 
acts  are  of  no  great  moment.  Both  classes  were  dutiable  through- 
out at  about  eleven  cents  per  pound.  In  relation  to  the  usual 
foreign  price  of  wool,  this  was  equivalent  to  something  like  fifty 

1  The  literature  on  the  wool  duty  is  voluminous.  Two  recent  contributions  are 
of  signal  importance,  and  supersede  those  of  earlier  date:  Professor  C.  W.  Wright's 
Wool-growing  and  the  Tariff,  in  Harvard  Economic  Studies  (1910);  and  the 
Report  of  the  Tariff  Board  on  Wool  and  Woolens  (191 2),  vol.  ii.  To  both  of  these 
frequent  reference  will  be  made.  Among  the  earlier  discussions,  reference  may  be 
made  to  a  frank  statement  from  the  wool  manufacturers'  point  of  view,  by  Mr. 
S.  N.  D.  North,  then  Secretary  of  the  Wool  Manufacturers  Association,  in  the 
Bulletin  of  that  Association,  December,  1900. 

296 


WOOL 


297 


per  cent;  the  ad  valorem  equivalent  of  course  fluctuated  with  the 
ups  and  downs  in  price.  The  specific  duties  on  carpet  wool,  a 
much  cheaper  grade,  were  always  lower  than  those  on  the  other 
classes.  But  for  them  also  the  ad  valorem  equivalent  was  in  the 
neighborhood  of  fifty  per  cent.1  This  regime,  needless  to  say, 
came  to  an  end  in  1913,  when  wool  was  again  put  on  the  free  list. 

The  general  relation  of  imports  to  domestic  production  during 
the  thirty  odd  years  of  high  protection  is  shown  in  the  chart  on 
page  298.  The  upper  line  shows  the  course  of  domestic  produc- 
tion. The  two  lower  lines  show  the  imports.  The  imports  are 
separately  indicated  for  two  classes,  corresponding  to  the  trade 
differences;  clothing  and  combing  wool  (classes  I  and  II  in  the 
tariff  acts)  being  thrown  together  as  one  class;  while  carpet  wool 
(class  III  in  the  tariff)  has  a  separate  line. 

Looking  first  at  domestic  production,  it  will  be  seen  that  dur- 
ing a  period  of  ten  or  fifteen  years  after  1870,  there  was  a  marked 
advance.  From  1870  to  1885  the  wool  grown  in  the  United  States 
doubled  in  amount.  But  after  1885  the  upward  movement 
ceased.  There  was  more  or  less  variation  from  year  to  year.  The 
clip  diminished  considerably  under  the  influence  of  free  trade  in 

1  The  following  tabular  statement  shows  what  the  wool  duties  were  from  1867. 
It  will  be  observed  that  the  duties  on  classes  I  and  II  (clothing  and  combing  wools) 
were  split  into  two,  according  to  the  value  of  the  wool,  in  1867  and  in  1883,  but  not 
thereafter.  The  duties  on  class  III  (carpet  wool)  were  similarly  split,  according  to 
value,  throughout;  they  were  ad  valorem  in  the  act  of  1890,  but  specific  in  all  the 
other  acts. 

Wool  Duties 


Act  of 

Class  I,  Clothing  Wool 

Class  II,  Combing  Wool 

Class  III,  Carpet  Wool 

1867 

Value  up  to  32C.-10C.  per  lb., 
plus  11% 

Same  duties  as  on  Class  I 

Value  up  to  12C.-3C.  per  lb. 

Value  over    32C.-12C.  per  lb., 

Same  duties  as  on  Class  I 

Value  over    i2c.-6c.  per  lb. 

plus  10% 

1883 

Value  up  to  30C.-10C.  per  lb. 

Same  duties  as  on  Class  I 

Value  up  to  12c— 2  §c.  per  lb. 

Value  over    30C.-12C.  per  lb. 

Same  duties  as  on  Class  I 

Value  over    12C.-5C.  per  lb. 

1890 

IIC. 

I2C. 

Value  up  to  13C.-32  %  od  valorem 
Value  over  130.-50%  ad  valorem 

1894 

Free 

Free 

Free 

1897 

IIC. 

12c. 

Value  up  to  12C.-4C.  per  lb. 
Value  over    12C.-7C.  per  lb. 

1909 

Same  as  1897 

Same  as  1897 

Same  as  1897 

1913 

Free 

Free 

Free 

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WOOL  299 

wool  under  the  tariff  act  of  1894;  it  increased  again  after  1897; 
for  some  of  the  early  years  of  the  present  century  it  attained  a 
figure  above  that  for  1885.  But  on  the  whole  it  remained  station- 
ary. Whatever  stimulus  was  given  by  the  duties  would  appear 
to  have  exhausted  its  effect  after  the  first  fifteen  years. 

The  imports,  on  the  other  hand,  during  this  period  after  1885 
show  a  tendency  to  increase,  especially  during  the  latter  part  of 
the  period.  They  never  ceased  entirely,  for  any  class;  and  as 
the  years  went  on,  they  became  larger.  Among  the  extraordinary 
fluctuations  some  are  obviously  accounted  for  by  the  tariff 
changes  of  1894-97.  The  free  admission  of  wool  in  1894  and  the 
re-imposition  of  duties  three  years  later  necessarily  caused  great 
shifts.  In  the  year  just  before  the  act  of  1894,  when  it  was 
almost  certain  that  wool  would  become  free,  imports  naturally 
shrank  almost  to  nothing.  They  then  rose  abruptly  as  soon  as 
the  abolition  of  the  duty  went  into  effect.  Again,  after  the  elec- 
tion of  McKinley  in  the  autumn  of  1896  it  became  in  turn  almost 
certain  that  the  duty  would  be  restored.  Consequently  during 
the  fiscal  year  1896- 189 7,  imports  were  rushed  in  from  every 
possible  quarter  while  wool  was  still  free.  They  then  fell  abruptly 
after  the  passage  of  the  tariff  act  of  1897.  For  several  years  after 
1897  the  stocks  of  wool  from  these  heavy  importations  weighed 
on  the  market,  and  prevented  the  price  of  wool  from  rising  as 
promptly  and  fully  as  had  been  expected.  During  the  interval 
imports  were  naturally  small,  and  confined  to  special  qualities. 
Not  till  1900  were  the  effects  of  this  abnormal  situation  out  of 
the  way.  Then,  as  the  chart  shows,  imports  mounted  for  all 
classes.  After  1900,  —  setting  aside  the  changes  due  to  ordinary 
trade  fluctuations,  —  the  general  trend  was  clearly  toward  an 
advance  in  the  imports.  The  larger  quantities  of  wool  needed 
by  the  growing  population  came  not  from  increase  of  the  domestic 
output,  but  from  increase  of  the  foreign  supplies. 

The  simplest  case  is  that  of  carpet  wool.  It  is  simplest  be- 
cause here  the  entire  supply  was  foreign  throughout.  Therein 
carpet  wool  stands  by  itself.  This  absence  of  any  domestic  pro- 
duction, notwithstanding  long-continued  duties  of  considerable 


300         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

weight,  is  easily  explicable  on  the  principle  of  comparative  advan- 
tage. 

Carpet  wool  is  of  coarse  grade,  clipped  from  sheep  neglected  as 
to  breed  or  pastured  with  poor  fodder  or  under  harsh  climate. 
It  comes  to  the  United  States  from  all  parts  of  the  world:  from 
China,  India,  the  interior  of  Asia,  Africa,  South  America,  Russia, 
Portugal,  Spain,  even  from  the  Highlands  of  Scotland.  Its 
coarse  quality  is  usually  due  to  poor  care  of  the  sheep  and  indif- 
ference as  to  breeding.  The  main  sources  of  supply  are  the  semi- 
civilized  regions,  —  India,  the  interior  of  Asia,  China,  Asiatic 
Turkey,  southern  and  southeastern  Russia.  In  other  regions, 
where  wool  growing  is  carried  on  by  the  highly-civilized  races  or 
under  their  guidance,  the  poorer  grades  of  sheep  are  displaced  by 
the  better,  which  yield  a  fleece  commanding  a  higher  price.  The 
careful,  intelligent,  and  well-informed  wool  grower  can  produce 
these  better  fleeces  with  the  same  labor  and  investment  as  the 
inferior  grades;  he  naturally  confines  himself  to  the  former. 
Sheep  from  which  carpet  wool  is  clipped  are  left  to  the  stolid  and 
ignorant  Mongolians,  Turkomans,  Russians;  in  part  also  to  the 
growers  in  mountainous  regions  (like  the  Pyrenees  and  Scotch 
Highlands)  in  which  the  more  valuable  sheep  cannot  be  sustained.1 

The  American  wool  grower  hence  confines  himself  to  the  sheep 
and  wools  of  the  better  qualities,  —  clothing  and  combing  wools,  — 
leaving  the  cheaper  grades  to  be  secured  by  importation.  It 
would  not  be  accurate  to  say  that  he  has  a  comparative  advan- 
tage in  the  better  grades;  for,  as  will  appear  shortly,  there  is  at 
least  doubt  whether  the  use  of  the  land  for  sheep  is  as  advanta- 
geous as  its  use  for  other  agricultural  or  pastoral  purposes.  But  he 
certainly  has  a  less  disadvantage  in  growing  clothing  and  combing 
wool  than  in  growing  carpet  wool.  The  tariff  stimulus  is  sufficient 
to  cause  him  to  produce  the  former;  it  would  need  to  be  much 
greater  —  preposterously  greater  —  to  induce  him  to  breed  poor 
sheep  and  bring  carpet  wool  to  market. 

The  fact  that  all  carpet  wool  was  imported  caused  the  debate 
on  this  part  of  the  protective  system  to  take  a  turn  of  its  own. 
Why  not  admit  such  wool  free,  since  there  was  no  competition 

1  See  the  account  of  carpet  wools  in  the  Tar  if  Board  Report  on  Wool,  pp.  413  seq. 


WOOL  30I 

with  any  domestic  product  ?  The  answer  of  the  wool  growers,  — 
who  were  throughout  the  most  uncompromising  and  even  fanati- 
cal among  the  protectionists,  —  was  that  part  of  this  wool  in  fact 
did  compete  with  the  domestic  product.  Some  fraction  was  used 
not  for  carpets,  but  for  cloths.1  True,  the  amount  was  not  con- 
siderable ;  moreover,  what  was  so  used  was  always  mixed  with  other 
and  better  wools,  chiefly  domestic,  sometimes  also  with  the  va- 
rious substitutes,  such  as  shoddy  or  noils  or  cotton.  But  even  the 
slightest  competition  of  this  sort  with  the  domestic  wool  growers 
was  regarded  as  fraudulent,  almost  criminal.  Not  only  was  the 
repeal  of  the  carpet  wool  duties  steadily  resisted,  but  an  increase 
in  them  was  demanded,  and  indeed  was  secured  to  some  degree 
in  the  tariff  acts  of  1890  and  1897.  The  acrimonious  contentions 
before  congressional  committees  between  the  wool  growers  and 
the  carpet  makers  all  rested  on  a  premise  which  a  consistent  free 
trader  could  not  accept,  —  namely,  that  so  far  as  the  imports  in 
fact  did  not  compete  with  domestic  wool,  so  far  was  there  a 
special  ground  for  admitting  them  free.  Precisely  no,  must  the 
free  trader  say.  A  duty  of  this  sort,  on  a  commodity  not  pro- 
duced within  the  country,  is  a  revenue  duty.  It  is  not  indeed 
one  of  the  simplest  sort  or  of  the  best  sort,  being  imposed  on  a 
raw  material,  and  hence  cumulative  in  effect  as  it  is  eventually 
paid  in  the  higher  price  of  the  finished  product.  But  at  least  it 
is  not  open  to  the  objection  that  an  additional  tax  is  imposed 
through  the  higher  price  of  the  supply  produced  at  home.  The 
last-named  effect  does  appear  as  regards  wool  of  the  other  classes; 
and  if  a  choice  must  be  made  between  exempting  from  duty  the 
carpet  wool  on  the  one  hand  or  the  clothing  and  combing  wools 
on  the  other,  the  free  trader  should  prefer  the  latter.  It  was 
natural  that  the  protectionists,  from  their  point  of  view,  should 
think  only  of  admitting  free  so  much  of  the  cheaper  wool  as  was 
used  in  fact  for  carpet  making,  not  the  portion  used  in  the  manu- 
facturing of  cloth.  No  such  discrimination  between  the  two 
classes,  however,  was  at  any  time  made  in  the  tariff  laws  enacted 
by  either  party.     When  the  opponents  of  high  protection  came 

1  On  the  extent  to  which  carpet  wool  was  used  in  this  way,  see  Tariff  Board 
Report  on  Wool,  pp.  413,  436. 


302         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

into  power,  in  1913,  as  in  1894,  wool  of  every  kind  was  admitted 
free.1 

The  other  classes  of  wool  —  clothing  and  combing  —  must  be 
considered  together.  They  present  some  intricate  economic 
problems ;  they  were  the  occasion  of  prolonged  and  bitter  contro- 
versy. Protection  to  wool  of  this  sort  was  the  center  of  the  pro- 
tective system  during  the  greater  part  of  the  period  covered  in 
the  present  volume. 

Something  should  first  be  said  on  the  qualities  and  uses  of  the 
two  classes.  Clothing  wool,  as  defined  in  the  tariff  acts  from 
1867  to  1913,  was  wool  from  sheep  of  the  merino  breed,  or  from 
sheep  having  an  admixture  of  this  strain.  Pure  merino  wool  is 
short  in  fibre  and  fine  in  quality.  Cross-breeding  affects  the 
length  and  quality  of  the  fibre,  and  hence  the  textile  uses  to  which 
it  can  be  put.  But  the  tariff  definition  and  classification  through- 
out regarded  every  wool  with  the  slightest  merino  strain  as 
"  clothing  wool  ";  even  though  it  was  used  in  the  woolen  manu- 
facture in  a  way  quite  different  from  that  contemplated  when 
the  tariff  distinctions  were  first  made.  What  was  put  in  class  II, 
"  combing  wool,"  on  the  other  hand,  was  wool  from  sheep,  pure 
bred,  of  the  typical  English  strain:  long  in  fibre,  not  short  like 
merino  wool;  coarse  in  quality,  not  tenuous  and  fine;  lustrous 
and  somewhat  harsh.  The  differences  in  the  characteristics  of 
these  wools  bring  corresponding  differences  in  the  fabrics  made 
from  them.  Merino  wool  is  used  for  making  "  cloths,"  or 
"  woolen  cloths,"  in  which  the  strands  cling  to  each  other  as  the 
short  fibres  touch  and  interlace;  which  are  compacted  and  closely 
woven,  often  thick  and  heavy.  Cloths  have  a  "  nap,"  or  yield- 
ing surface,  more  or  less  smoothed  off  in  the  finishing  processes, 

1  In  the  tariff  bills  introduced  by  the  Republicans  during  the  62d  Congress 
(1911-13)  it  was  proposed  that  the  duty  on  carpet  wools  should  continue  to  be 
collected  on  its  importation,  but  that  the  carpet  manufacturers  should  get  a  draw- 
back of  the  amount  paid  in  duties  to  the  same  extent  (99  per  cent)  as  if  they  exported 
carpets;  thus  securing  virtual  exemption  for  so  much  of  the  wool  as  was  actually 
used  in  carpet  making.  This  proposal,  of  course,  had  no  chance  of  adoption,  dur- 
ing the  Congress  of  1911-13;  then  the  Democrats  controlled  the  House,  the  Re- 
publicans the  Senate,  and  no  tariff  legislation  was  possible.  But  it  represented  the 
consistent  protectionist  policy. 


WOOL  303 

yet  giving  the  fabric  a  character  of  its  own  due  to  the  short  fibre 
of  the  wool.  Combing  wool,  on  the  other  hand,  serves  to  make 
"  worsteds  "  and  "  dress  goods,"  —  smooth  fabrics,  with  an  even 
and  perhaps  glossy  surface,  usually  stiffer  than  cloths  made  from 
merino  wool,  and  usually  lighter  in  weight. 

Quite  as  important  as  the  difference  in  the  fleece  of  the  two 
kinds  of  sheep  is  the  difference  in  their  flesh.  The  English  (comb- 
ing wool)  animals  are  mutton  sheep;  their  meat  is  excellent; 
for  this  primarily  they  are  bred,  not  for  wool.  Merino  sheep,  on 
the  other  hand,  are  scrawny  creatures,  with  a  tough  and  scant 
covering  of  flesh;  they  are  bred  primarily  for  their  magnificent 
fleece.  The  two  varieties  differ,  again,  as  regards  habitat  and 
herding;  and  these  differences  also  have  economic  consequences 
of  some  importance.  The  combing  wool  (mutton)  sheep  flourish 
in  a  cool  moist  climate  like  that  of  England,  their  country  of 
origin.  The  merino  sheep,  of  a  strain  perfected  first  in  Spain, 
adapt  themselves  readily  to  very  diverse  conditions,  yet  on  the 
whole  do  best  in  a  dry,  warm  climate,  and  are  specially  fitted  for 
arid  or  semi-arid  regions.1  As  regards  herding,  the  merino  sheep 
keep  together,  moving  and  cropping  in  bands;  whereas  the  Eng- 
lish sheep  are  apt  to  stray  singly.  The  former,  therefore,  are  more 
easily  cared  for  and  protected  in  frontier  countries  and  in  regions 
where  lack  of  sufficient  precipitation  makes  cultivation  of  the 
soil  impossible. 

All  these  differences,  however,  are  smoothed  away,  and  indeed 
sometimes  quite  wiped  out,  by  cross-breeding.  Sheep  having  a 
strain  of  either  blood  show  in  varying  degrees  the  characteristics 
of  both,  according  to  the  preponderance  of  one  or  the  other 
strain.     The  profit  through  securing  from  the  same  animal  sale- 

1  "  The  merino  is  beyond  question  the  most  cosmopolitan  of  the  sheep  tribe. 
No  breed  has  passed  into  all  countries  and  thriven  as  the  merino,  and  still  further 
no  other  breeds  have  been  able  to  become  so  closely  identified  with  their  environ- 
ment as  to  become  the  progenitors  of  native  families  as  in  the  instance  of  the 
merino.  This  would  seem  to  be  due  to  the  migrating  habits  that  characterize  the 
merino  in  Spain,  where  the  flocks  are  driven  towards  the  north  in  summer  and 
southward  in  winter,  thus  becoming  inured  to  all  the  variations  of  a  diversified 
country."  Craig,  Sheep-Farming  in  North  America,  p.  34.  On  the  hardiness  of 
the  merino  and  its  tendency  to  herd  in  large  numbers  (hence  less  need  of  shepherding) 
see  Tariff  Board  Report,  pp.  605-607.     Cf.  the  note  to  p.  315,  below. 


304         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

able  mutton  and  desirable  wool  has  caused  growers  in  most 
countries,  and  especially  in  the  United  States,  to  turn  to  cross- 
breeding. At  the  same  time  improvements  in  machinery  have 
made  it  quite  feasible  to  use  most  cross-bred  wool  in  either  of  the 
main  manufacturing  processes,  —  for  making  either  cloths  or 
worsteds.1  Consequently  much  wool,  —  probably  the  larger 
part,  —  which  was  classed  by  our  tariff  as  "  clothing  wool  "  was 
used  in  fact  for  the  same  purposes  as  "  combing  wool."  The 
tariff  classification,  as  has  already  been  said,  became  quite  out  of 
accord  with  the  trade  classification,  which  was  based  not  on  blood, 
but  on  the  industrial  uses  of  the  fibre.  Both  domestic  and  im- 
ported wool  was  largely  cross-bred;  and  imported  wool  competed 
in  much  the  same  way  with  domestic  wool,  whether  classed  at  the 
custom  houses  as  clothing  or  combing.  In  comparing  the  imports 
with  the  domestic  output,  the  tariff  classes  I  and  II  may  be, 
therefore,  thrown  together,  —  as  has  been  done  in  constructing 
the  chart. 

Comparing  now  the  total  imports  of  wool  used  for  clothing 
with  the  domestic  production  of  wool  (all  used  for  the  same  pur- 
pose) it  is  obvious  that  a  substantial  contribution  to  the  supply 
came  throughout  from  the  imports.  At  no  time  did  they  cease; 
as  the  years  went  on,  they  tended  to  grow.2  The  conclusion 
would  seem  warranted  that  the  whole  supply,  domestic  as  well 
as  foreign,  was  raised  in  price  by  the  full  amount  of  the  duty. 
The  proximate  economic  loss  which  may  be  ascribed  to  a  pro- 
tective tariff  seems  in  this  case  susceptible  of  accurate  calcula- 
tion: multiply  the  domestic  output  by  the  rate  of  the  duty. 

Some  of  the  qualifications  which  must  be  borne  in  mind  when 
making  such  calculations  do  not  seem  applicable  in  the  case  of 
wool.      There  were  no  peculiarities  of  transportation,  no  geo- 


1  Cf.  what  is  said  below,  at  p.  327. 

2  The  proportion  of  imports  to  domestic  product  is  shown  summarily  by  the 

following  figures:  — 

Average  Imports, 

Per  Year,  of  Wool,  Average  Domestic 

Classes  I  and  II  Product,  Per  Year 

Period  1884-90 26  mill.  lbs.  321  mill.  lbs. 

"        1891-93  (under  the  McKinley  tariff) 45        "  329        ■ 

"        1895-97  (under  the  Wilson  tariff,  wool  free)    153        "  272        ■ 

"        1900-06  (duty  restored) 65        "  297        " 

"        1907-12  (duty  restored) 95        "  314        ■ 


WOOL  305 

graphically  distinct  markets,  such  as  explain  the  exceptional  im- 
ports of  iron  and  steel,  and  show  them  to  be  of  little  significance. 
Foreign  and  domestic  wools  were  marketed  in  the  same  places, 
namely,  in  the  large  cities  of  the  Atlantic  seaboard.  Nor  were 
there  differences  in  quality  which  might  require  them  to  be  re- 
garded as  distinct  for  industrial  purposes.  It  is  true  that  during 
the  earlier  part  of  our  period,  say  from  1870  to  1885,  allowance 
perhaps  would  have  had  to  be  made  for  differences  in  quality. 
Then  the  imported  quota  seems  to  have  been  usually  of  finer 
grade  than  the  domestic.  The  latter  was  then  said  to  be  in  the 
main  good  ordinary  merino  wool,  suited  for  the  medium  grades 
of  fabrics  chiefly  made  within  the  country;  while  the  imported 
wool  was  either  strictly  combing  wool  or  a  fine  grade  of  clothing 
wool.  But  these  differences,  if  ever  they  were  important,  ceased 
to  be  so  before  the  close  of  the  period.  Domestic  wool  came  to 
be  largely  cross-bred;  a  considerable  portion  of  it  was  available 
for  all  the  uses  of  combing  wool;  nor  was  there  any  marked  lack 
of  fine  fibres.  Wool  varies  to  an  extraordinary  degree  in  quality. 
It  is  affected  not  only  by  the  breed  of  the  sheep,  but  by  many 
and  various  causes,  such  as  food,  climate,  shelter,  care,  and  time 
of  shearing.1  Of  all  the  textile  fabrics,  it  seems  least  standardiz- 
able;  and  for  that  reason,  it  may  be  remarked,  it  cannot  be  made 
the  object  of  organized  speculation.  But  the  gradations  were 
and  are  very  much  the  same  for  domestic  wool  as  for  imported. 
Whatever  general  differences  in  quality  existed  in  the  years 
1870-90  ceased  to  be  of  much  significance  during  the  later 
period.      Though  the  particular  way  in  which  our  tariff  duties 

1  "  The  superior  purity  of  the  Australian  wools,  their  softness,  lightness,  and 
lustre,  are  attributed  to  the  climatic  conditions  of  that  country.  .  .  .  Spanish 
merinos  were  introduced,  and  it  soon  became  noticeable  that  the  wool  from  the 
Australian  flocks  was  of  a  finer  quality  than  that  grown  upon  the  sheep  fed  upon 
the  pastures  of  Spain.  Dr.  Bowman  considers  that  an  even  temperature  and  a 
certain  amount  of  moisture  are  necessary  for  the  retention  of  lustre  [that  is,  for 
sheep  of  the  English  mutton  types],  and  he  cites  New  Zealand  wool  as  illustrative 
of  this  relationship.  ...  It  is  known  that  some  soils  color  wools  so  that  they 
cannot  be  washed  white.  Territory  wool  has  a  characteristic  bluish  tinge  that 
detracts  greatly  [?]  from  its  market  value.  Scott  asserts  that  the  best  wool  growing 
land  is  generally  that  on  a  sandstone  foundation,  as  it  gives  the  wool  the  quality 
of  being  bright  and  clean,  while  he  considers  that  volcanic  or  limestone  soils  are 
thought  to  favor  harshness."     Craig,  Sheep-Farming  in  North  America,  pp.  38-39. 


306         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

were  assessed  (as  will  presently  appear)  operated  to  exclude  some 
sorts  of  foreign  wool,  they  did  not  restrict  the  imports  to  any 
one  quality  or  grade,  or  prevent  the  imported  quotas  from  being 
comparable  on  the  whole  with  the  domestic. 

In  one  direction,  however,  the  application  of  the  formula: 
economic  loss  =  domestic  product  X  rate  of  duty,  must  be  modi- 
fied. A  point  of  difference  between  imported  and  American  wools 
was  that  almost  all  the  former  were  virtually  improved  in  quality, 
and  in  that  sense  graded,  by  "  skirting."  A  long  controversy 
on  skirted  wools  raged  between  wool  growers  and  manufacturers. 
"  Skirting  "  means  that  some  inferior  parts  of  the  fleece  have 
been  cut  off.  The  better  parts  are  packed  separately;  a  simple 
and  convenient  process,  the  natural  result  of  the  different  uses  of 
the  varying  fibres.  Skirting  is  commonly  practised  in  Australia, 
and  the  better  wool  thus  differentiated  of  course  commands  a 
somewhat  higher  price  than  wool  quite  unsorted.  The  tariff 
acts  previous  to  1890  had  imposed  double  duties  on  wool  "  im- 
ported in  any  other  than  the  ordinary  condition  ";  but  in  1890 
skirted  wool  was  specifically  made  subject  only  to  the  normal 
wool  duty;  and  it  was  similarly  treated  in  1897  and  1909.  Am- 
erican fleeces,  on  the  other  hand,  were  never  skirted;  all  the 
wool  from  a  sheep  was  sold  (and  is)  in  one  batch  and  at  one  price. 
By  custom,  the  process  of  sorting  was  left  entirely  to  the  dealer 
or  manufacturer.1  Skirted  Australian  wool  of  course  commanded 
a  higher  price  than  the  unassorted  American;  and  in  comparing 

1  On  skirted  wool,  see  Wright,  pp.  284-286,  and  Tariff  Report  on  Wool,  p.  337. 
It  is  a  curious  fact  that  American  wool  not  only  comes  to  market  quite  unassorted, 
but  is  often  fraudulently  or  carelessly  mixed  with  rubbish,  twine  and  scraps. 
"  Australian  and  New  Zealand  wool  is  packed  more  honestly  than  American  wool  " 
(I  quote  from  the  Textile  World  Record,  June,  1908).  American  cotton  is  also 
said  to  come  to  market  in  bad  condition.  "  Poor  ginning  [of  American  cotton] 
injures  the  staple;  baled  cotton  is  left  uncovered  and  is  damaged  by  the  weather; 
the  bagging  is  the  heaviest  and  poorest  that  ingenuity  can  devise  and  it  is  charged 
at  the  same  price  as  cotton.  ...  An  Egyptian  bale  is  a  model  of  neatness  and 
compactness,  with  a  light  and  strong  covering,  held  together  by  proper  hoops,  and 
both  bagging  and  hoops  are  deducted  as  tare."  (From  the  presidential  address  of 
Mr.  J.  R.  MacColl,  before  the  Cotton  Manufacturers'  Association,  April,  1906.) 
I  suspect  these  defects  in  both  domestic  materials  are  ascribable  to  the  unbridled 
individualism  of  the  American  planter  and  wool  grower.  Some  form  of  cooperative 
organization  for  sales  might  bring  improvement. 


WOOL  307 

prices,  and  gauging  the  effect  of  the  duty,  something  must  be 
allowed  for  this  circumstance.  Competent  persons  in  the  trade 
have  concluded  that  a  deduction  of  about  three  cents  from  the 
stated  duty  must  be  made  in  order  to  offset  the  effect  of  skirting; 
the  duty  of  eleven  cents  a  pound  on  skirted  wool  was  equivalent 
to  one  of  (roughly)  eight  cents  a  pound  on  wool  not  thus  assorted. 
If  all  the  imported  wool  had  been  skirted,  the  duty  of  eleven 
cents  would  thus  have  been  the  same  in  effect  as  one  of  eight 
cents  on  wool  strictly  comparable  to  the  American  fleeces.  The 
burden  or  loss  ascribable  to  the  tariff  would  then  be  calculated 
on  a  basis  somewhat  lower  than  that  of  the  full  duty.1 

We  may  proceed  now  to  a  more  detailed  examination  of  the 
history  of  the  domestic  production  of  wool,  and  more  especially 
of  the  lessons  from  the  geographical  distribution  of  different 
periods. 

A  glance  at  the  table  on  page  308  will  show  that  the  number 
of  sheep  (a  sufficient  indication  of  the  wool  clip)  in  different  parts 
of  the  country  has  undergone  great  and  apparently  irregular 
variations.  Yet  the  variations  in  fact  conform  to  some  general 
tendencies;  and  these  tendencies  are  instructive. 

It  will  be  seen  that  in  the  entire  region  east  of  the  Allegheny 
mountains  there  was  a  marked  and  uninterrupted  decrease  in 
the  number  of  sheep  from  the  middle  of  the  nineteenth  century 
to  1910.  The  decline  is  most  striking  in  New  England  and  in 
New  York.      It  is  great  also  in  Pennsylvania,  even  though,  as 

1  Thus  for  191 2  we  should  have  the  following  figures:  — 

Imports  (fiscal  year,  1011-12):  — 

Class  I 69,300,000 

Class  II 10,900,000 

Total  Imports,  clothing  wool 80,000,000  lbs. 

Domestic  Product  (calendar  year,  1912) 304,000,000    " 

Charges  on  the  domestic  consumer:  — 

On  80  million  lbs.,  imported  wool,  at  ire $8,800,000 

On  304  million  lbs.,  domestic  wool:  — 

if  reckoned  at  1  ic.  lb $33,400,000 

if  reckoned  at    8c.  lb 24,300,000 

Some  figure  between  the  last  two  would  seem  to  give  with  a  sufficient  approach 
to  accuracy  the  prima  facie  national  loss  from  protection  to  wool. 

From  statements  made  to  me  by  wool  dealers  I  gather  that  practically  all  the 
imported  wools  of  class  I  (which  greatly  preponderate  in  the  imports)  are  skirted. 


308         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 


will  appear  presently,  the  tariff  has  operated  in  special  degree  to 
maintain  wool  growing  in  some  parts  of  that  state.  In  the  group 
of  states  which  represent  the  great  northern  central  region  of  the 
country,  a  somewhat  different  movement  appears.  The  number 
of  sheep  increases  from  the  middle  of  the  nineteenth  century  until 
about  the  year  1880,  but  thereafter  undergoes  a  progressive  de- 
cline.    Ohio  is  by  far  the  most  important  of  these  states,  so  far 

Number  of  Sheep  1  (000  omitted) 


New  England . 
New  York  . .  . 
Pennsylvania 


Ohio 

Michigan 
Illinois. .  . 


California 
Texas  . . . 
Oregon  .  . 


Montana 
Wyoming  .  .  . 
Colorado   .  .  . 
New  Mexico. 


1840 


3,820 

5>"9 
1,768 

2,028 
100 
396 


1850 


2,258 

3,453 
1,822 

3,943 
746 

894 

18 

i°5 

IS 


377 


i860 


1,780 
2,618 
1,632 

3,547 

1,273 

709 

1,088 

753 
86 


830 


1870 


1,45° 
2,182 

i,794 

4,929 
1,986 
1,568 

2,768 
7i4 
3i8 

2 

6 

121 

619 


1880 


1,326 
i,7i5 
i,777 

4,902 
2,189 
i,037 

5,727 
3,652 
1,368 

2  79 

45° 

1,091 

3,939 


1890 


937 
1,529 
1,612 

4,061 
2,400 

923 

3,373 
4,264 
1,780 

2,353 
7i3 
897 

2,474 


1900 


563 
939 
959 

2,648 

1,626 

629 

1,725 
1,440 
1,961 

4,215 
3,327 
i,353 
3,334 


1910 


305 
605 

037 

2,892 

i,545 
661 

1,440 

i,364 
1,982 

4,979 
4,676 

2,93i 


as  wool  growing  is  concerned.  Even  in  Ohio  the  number  of 
sheep,  though  it  still  remained  considerable,  showed  an  unmis- 
takable decline  after  1890.  Turning  to  the  region  west  of  the 
Missouri  river,  we  find  still  a  different  movement.  In  some 
states  there  is  an  almost  continuous  increase;  in  others,  fluctua- 
tions not  dissimilar  to  those  of  the  eastern  region.  In  California 
and  Texas,  for  example,  during  the  twenty  years  from  i860 
to  1880,  the  figures  show  an  extraordinarily  rapid  increase.  But 
during  the  next  generation  the  movement  is  reversed.      The 

1  I  take  these  figures  from  Wright,  Appendix  Table  II.  They  are  derived  from 
Census  reports,  but  no  one  supposes  them  to  be  more  than  approximations  to  the 
truth,  especially  for  the  earlier  periods.  They  are  sufficient  approximations,  how- 
ever, to  indicate  the  general  trend. 


191 


WOOL  309 

number  of  sheep  in  each  of  these  states  declined  during  the  en- 
suing thirty  years,  and  in  1910  was  hardly  one-third  of 
what  it  was  in  1880  and  1890.  Oregon  belongs,  on  the  whole, 
in  the  same  group.  Here,  too,  there  was  a  rapid  increase  until 
1890;  thereafter,  the  number  remained  virtually  stationary. 
On  the  other  hand,  the  characteristic  ranching  states,  like  Mon- 
tana, Colorado,  and  Wyoming,  show  an  almost  continuous 
growth.  Here  the  number  of  sheep  in  19 10  was  much  greater 
than  it  had  been  twenty  years  before.  New  Mexico  also  holds 
her  own. 

The  main  explanation  of  these  variations  is  that  wool  has  been 
and  is  characteristically  a  frontier  product.  It  is  easily  transport- 
able; it  is  not  perishable;  sheep  raising  is  a  ready  and  profitable 
use  of  the  land  when  land  is  plenty,  population  scarce,  and  trans- 
portation expensive.  During  the  earlier  stages  in  the  develop- 
ment of  New  York,  Ohio,  and  Illinois,  wool  growing  was  an 
important  industry.  As  population  thickened,  other  uses  of  the 
land  became  more  advantageous,  and  the  pastoral  use  of  the 
land  for  sheep  was  displaced.  Precisely  the  same  transition  has 
taken  place  within  the  last  generation  in  California  and  Texas. 
During  the  first  period  of  settlement,  sheep  were  herded  in  these 
states  by  the  million.  As  settlement  progressed,  agriculture  took 
the  place  of  ranching;  and  sheep  and  wool  declined.1 

Reference  has  been  made  to  the  rapid  and  striking  increase  of 
the  American  wool  clip  which  took  place  during  the  years  from 
1870  to  1883.  This  was  a  period,  as  it  happened,  of  unusually 
rapid  extension  of  the  frontier.  In  1869,  the  first  transcontinen- 
tal railway  was  completed,  —  the  combined  Union  Pacific-Central 
Pacific  line.  During  the  ensuing  decade,  several  other  great 
systems,  the  Burlington  route,  the  Northern  Pacific,  the  Atchi- 
son, the  Southern  Pacific,  were  building  rapidly  across  the  western 
plains.  A  vast  grazing  region  was  opened ;  the  lands  upon  which 
the  great  herds  of  buffalo  had  wandered  were  gradually  stocked 
with  sheep.     This  rapid  movement  accounts  for  the  growth  of 

1  "  The  decline  in  the  number  of  sheep  with  the  advent  of  the  farmer  is  nowhere 
more  noticeable  than  in  California."  In  1880  that  state  had  7,500,000  sheep;  in 
1910,  only  2,250,000.      Tariff  Board  Report  on  Wool,  p.  602. 


3IO         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

the  wool  clip.  Elsewhere,  wool  growing  was  on  the  decline;  it 
was  the  rapid  growth  in  the  then  territories  which  made  up  for 
the  loss.  After  1885,  the  decline  in  the  country  at  large  con- 
tinued, and  the  growth  in  the  great  grazing  region,  though  main- 
tained, was  at  a  slackened  rate;  consequently,  the  country's  clip 
as  a  whole  remained  stationary. 

The  great  pastoral  region  west  of  the  Missouri  river  obviously 
cannot  have  the  same  future  as  the  agricultural  region  to  the 
eastward.  Rainfall  becomes  progressively  less  toward  the  west, 
until,  at  about  the  one  hundredth  meridian,  toward  the  western 
edge  of  Kansas  and  Nebraska,  it  becomes  insufficient  for  agri- 
culture. Doubtless  it  cannot  be  said  just  how  far  the  tillable 
area  extends;  the  methods  of  "  dry  farming  "  may  stretch  it 
somewhat  farther  than  was  long  supposed.  But  beyond  lies  the 
arid  and  semi-arid  country.  Patches  of  it  may  be  reclaimed  by 
irrigation,  but  patches  only.  In  the  main,  it  must  always  be  a 
pastoral  region.  Here  sheep  herding  and  wool  growing  have  a 
chance  for  permanent  lodgment. 

The  displacement  of  sheep  growing  as  one  of  the  main  uses  of 
the  land  in  the  eastern  region  is  simply  one  further  illustration 
of  the  working  of  the  principle  of  comparative  advantage.  Dur- 
ing the  frontier  stage,  this  pastoral  use  of  land  is  advantageous. 
But  as  population  thickens,  settled  agriculture  becomes  unmis- 
takably more  advantageous,  and  displaces  the  other  use.  Pre- 
cisely the  same  movement  is  taking  place  the  world  over.  Sheep 
growing  has  declined  throughout  western  Europe,  —  except  in 
England,  where  some  special  conditions  prevail,  sheep  being  kept 
primarily  for  mutton.  For  wool,  the  main  supply  of  England 
as  well  as  of  the  manufacturing  countries  of  all  western  Europe 
comes  from  various  outlying  regions,  such  as  Australia,  Argen- 
tina, South  Africa.  These  correspond  for  economic  purposes  to 
the  successive  frontier  areas  of  the  United  States.  In  Europe, 
as  in  the  United  States,  the  use  of  agricultural  land  for  wool 
growing  has  given  place  to  other  and  more  advantageous  uses.1 

1  The  history  and  explanation  of  the  displacement  of  wool  growing  by  tillage 
constitute  the  main  theme  of  Professor  Wright's  volume,  so  often  referred  to  in 
the  preceding  pages  {Wool-growing  a>id  the  Tariff).     See  particularly,  pp.  135  seq., 


WOOL  3  1 1 

It  would  seem  that  the  great  arid  and  semi-arid  plains  and 
mountains  which  stretch  from  the  western  edge  of  the  Missouri 
valley  almost  to  the  Pacific  coast  might  become  permanent  sheep 
pastures  and  permanent  sources  of  wool  supply.  But  here  once 
more  the  principle  of  comparative  advantage  comes  into  play. 
Use  of  the  land  for  another  pastoral  purpose  seems  likely  to  dis- 
place wool  growing.  The  grazing  plains  which  can  support  sheep 
can  support  cattle  also.  Meat  is  in  more  insistent  demand  than 
wool  and  cattle  pay  better  than  sheep.  The  modern  changes  in 
transportation  serve  to  increase  the  trend  toward  cattle  raising. 
Cattle  as  well  as  meat  can  be  transported  with  an  ease  un- 
dreamed of  a  half  a  century  ago.  Before  the  days  of  highly 
developed  railway  transportation,  wool  was  the  one  product 
which  could  be  easily  carried  from  the  frontier.  Now  cattle  are 
carried  their  thousands  of  miles.  The  practice  of  rearing  them 
on  the  plains,  and  then  transporting  them  to  the  corn  belt  of  the 
Mississippi  valley  for  fattening,  has  attained  great  proportions. 
Wool  growing  has  met  in  the  pastoral  region  a  competitor  as 
formidable  as  tillage  proved  to  be  in  the  Mississippi  valley  itself. 

Nevertheless,  there  are  considerable  parts  of  the  western  region 
which  are  unavailable  for  cattle,  and  which  apparently  will  always 
be  left  to  the  sheep  grower.  Sheep  need  less  water  than  cattle, 
and  hence  will  always  retain  their  place  in  the  drier  parts,  espe- 
cially in  the  southwest.  They  can  be  herded  in  hilly  and  moun- 
tainous regions  where  cattle  cannot  be  kept;  they  flourish  on 
herbage  which  is  too  scant  for  the  larger  animals.  Similar  causes, 
it  may  be  remarked,  bring  about  the  dominance  of  sheep  growing 
in  Australia.  In  the  vast  interior  of  that  continent,  precipitation 
is  even  less  than  it  is  in  the  greater  part  of  our  western  region. 
Moreover  the  hot  and  dry  climate  is  better  adapted  for  sheep 

on  the  middle  west  in  1840-60;  pp.  250  seq.,  on  the  opening  of  the  far  west;  and  pp. 
258  seq.,  on  the  general  competition  between  wool  growing  and  other  agricultural 
operations.  Instructive  maps,  showing  the  westward  movement  of  wool  growing, 
are  in  a  paper  by  Professor  H.  C.  Taylor,  published  by  the  Wisconsin  Agricultural 
Experiment  Station,  June,  191 1. 

For  some  further  illustrations  of  the  working  of  the  principle  of  comparative 
advantage,  —  grain  and  dairying  being  found  more  profitable  than  sheep,  —  see  the 
Tariff  Board  Report  on  Wool,  pp.  563  (Illinois),  571  (Wisconsin),  581  (Nebraska). 


312         SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

and  especially  merino  sheep,  than  for  cattle.  There  is  a  natural 
division  of  labor,  —  natural  in  the  sense  of  resting  on  physical 
causes,  —  when  sheep  are  herded  and  wool  is  produced  in  the 
interior  of  Australia  and  in  the  similar  parts  of  our  west,  while 
cattle  raising  dominates  those  parts  of  the  west  where  the  climate 
and  topography  are  adapted  to  them. 

There  is,  however,  another  and  entirely  different  aspect  of 
wool  growing.  In  the  preceding  paragraphs  regard  has  been 
had  to  those  pastoral  conditions  under  which  wool  growing  is 
the  main  use  of  the  land.  Quite  different  is  the  situation  when 
sheep  are  kept  as  a  by-product  of  general  farming.  Sheep  in 
small  numbers  can  probably  be  kept  with  profit  on  almost  any 
farm.  They  are  certainly  kept  with  profit  on  very  many.  Their 
keep  costs  little;  they  enrich  the  soil;  and  what  is  got  for  their 
wool  and  mutton  is  so  much  extra  gain.  The  gain  from  keeping 
a  few  sheep  perhaps  becomes  greater  as  farming  becomes  more 
intensive;  though  the  circumstance  that  sheep  growing  has 
almost  disappeared  in  the  western  part  of  Germany,  where  culti- 
vation is  highly  intensive,  indicates  that  generalization  on  this 
topic  must  be  guarded. 

At  all  events,  in  the  United  States,  farmers  in  considerable 
number,  especially  in  the  northern  central  region,  maintain  each 
a  few  sheep  as  a  by-product.  These  are  most  profitably  the 
cross-breds.  Though  the  pure  English  strain  is  not  adapted  to 
the  food  or  climate,  sheep  of  mixed  breed  do  well,  kept  with  a 
view  rather  to  meat  than  to  wool.  In  the  pastoral  region  of  the 
west  the  merino  strain  long  predominated.  Even  there,  however, 
a  movement  similar  to  that  in  cattle  growing  has  taken  place; 
cross-bred  sheep  are  reared  on  the  ranches,  and  then  sent  east- 
ward to  be  fattened  in  the  corn  belt.  It  is  in  the  farming  region 
proper,  however,  that  the  keeping  of  sheep  primarily  for  mutton 
has  most  developed.  Here  the  sheep  are  a  by-product  of  general 
farming;  and  the  wool  itself  is  a  by-product  of  that  by-product. 

To  the  general  tendency  that  wool  growing  on  a  large  scale 
tends  to  disappear  from  thickly  populated  countries,  being  rele- 
gated to  frontier  regions  or  to  those  regions  whose  climatic  condi- 


t 


wool  3 i 3 

tions  condemn  them  to  a  perpetual  frontier  state,  there  are  two 
striking  exceptions.  One,  already  referred  to,  is  in  England, 
where  more  sheep  are  permanently  maintained  than  in  any  other 
thickly  settled  country.  The  favoring  circumstances  are  un- 
usual: a  great  demand  for  mutton,  a  climate  suited  to  the 
mutton  breed,  soils  which  seem  to  benefit  unusually  by  the  en- 
richment from  sheep.  Wool  is  much  the  less  important  of  the 
chief  products.  The  maintenance  of  sheep  growing  in  England 
in  face  of  complete  free  trade  and  heavy  wool  imports  indicates 
that  this  use  of  the  land  is  advantageous.  The  other  analogous 
region  is  in  the  northern  and  eastern  part  of  Ohio,  with  adjacent 
districts  in  Pennsylvania  and  Michigan.  Here  also  sheep  rais-; 
ing  remains,  not  on  a  small  scale  as  a  by-product  of  general 
farming,  but  as  an  important  part,  even  the  most  important  part, 
of  agricultural  operations.  Here  merino  sheep  were  long  main- 
tained; and  even  though  cross-bred  sheep  kept  for  mutton  have 
in  good  part  replaced  them,  wool  and  the  price  of  wool  still 
bulk  large  in  the  farmers'  eyes.  Here  was  the  main  seat  of  a 
vehement  protectionist  feeling.  Here  lived  President  McKinley, 
and  here  he  imbibed  that  devotion  to  the  principle  of  protection 
with  which  his  name  is  linked  in  history.  The  case  is  unlike  the 
English  case,  in  that  the  maintenance  of  wool  growing  was  de- 
pendent on  protection.  It  happens  that  considerable  parts  of 
the  Ohio  area  are  hilly  and  easily  eroded,  and  not  so  advantageous 
for  general  agriculture  as  the  typical  prairie  land  of  the  Mississippi 
valley.  It  was  natural  that  wool  growing,  once  established  here 
under  frontier  conditions,  and  much  promoted  by  the  exceptional 
need  for  wool  during  the  civil  war  period,  should  be  clung  to 
almost  with  desperation,  and  should  become  the  basis  of  an 
intense  and  uncompromising  demand  for  protection. 

Comparing  now  the  different  wool  growing  regions  of  the 
United  States,  it  is  clear  that  the  conditions  were  very  diverse 
in  the  several  seats  of  the  industry.  One  could  hardly  find  a 
better  illustration  of  an  industry  conducted  not  with  constant 
costs,  but  with  costs  greatly  varying.  On  this  phase  of  the 
wool  situation  the  Tariff  Board's  inquiries  of  1909-12  led  to 
some  striking  results.     The  special  subject  to  which  the  Board 


314         SOME  ASPECTS  OF  THE   TARIFF  QUESTION 

directed  its  attention  was  the  cost  of  wool  within  the  country 
and  without,  —  with  reference  to  that  principle  of  "  equalizing  " 
costs  of  production  which  then  played  so  large  a  part  in  the 
tariff  debate.  Untenable  as  is  the  principle  itself,  the  inquiries 
to  which  it  gave  rise  served  to  supply  illustrations  on  the  prin- 
ciples really  essential  in  the  controversy. 

Wool  being  a  product  supplied  jointly  with  mutton,  the 
Board's  first  task  was  to  demarcate  if  possible  the  separate  cost 
of  wool.  In  this  task  it  followed  the  method  approved  in  eco- 
nomic theory,  deducting  from  the  total  cost  (supply  price)  of  the 
whole  the  price  obtained  (the  demand  price)  for  the  products 
other  than  wool.1  The  total  cost  of  sheep  rearing  was  first 
ascertained  or  approximated;  then  the  receipts  from  products 
other  than  wool  (chiefly  mutton)  were  deducted ;  the  residue  was 
taken  to  be  the  separate  cost  of  wool.  Obviously  the  "  cost  "  of 
wool,  thus  made  out,  was  a  figure  to  be  used  with  caution.  It 
was  the  "  derived  "  cost  of  wool,  not  an  independent  cost.  It 
was  directly  dependent  on  the  receipts  obtained  from  the  mutton; 
yet  none  the  less,  nay,  for  that  very  reason,  a  significant  figure. 
It  meant  that  wherever  much  was  obtained  from  the  sale  of 
mutton,  so  much  less  was  needed  to  make  it  worth  while  to 
supply  the  wool;  and  conversely  that  where  little  was  got  from 
mutton,  so  much  more  would  have  to  be  got  from  wool  in  order 
to  make  the  rearing  of  sheep  worth  while. 

Calculated  in  this  way,  the  "  cost  "  of  wool  showed  extraordi- 
nary diversities.  The  summary  statement  made  by  the  Tariff 
Board,  giving  the  results  in  the  most  general  form,  ran  as  follows: 2 


Number  of  Average 

Sheep  "  Cost  "  of  Wool 

1.  Western  region  (the  "  Territories  ")....     35,000,000  11  cents 

2.  Ohio  region  (merino  sheep) 5,000,000  19  cents 

3.  Cross-bred  sheep  in  other  regions  east  of 

the  Missouri  river    10,000  000  nil 

These  figures,  however,  not  only  showed  an  extraordinary 
range,  —  from  nineteen  cents  a  pound  to  nothing  at  all,  —  but 

1  See  the  elegant  analysis  of  this  case,  as  well  as  of  the  case  of  joint  demand,  in 
Marshall's  Principles  of  Economics,  Book  V,  ch.  vi,  §§  1,  4  (6th  edition). 

2  Report,  p.  377.     Cf.  also  the  Summary,  at  p.  10. 


wool  3 i 5 

were  themselves  averages  made  up  from  widely  varying  figures. 
Thus,  in  the  most  important  of  the  three  regions  (the  western), 
for  which  an  average  cost  of  eleven  cents  was  given,  the  individual 
costs  whence  the  average  was  deduced  varied  from  a  maximum 
of  twenty-four  cents  a  pound  to  a  minimum  of  four  cents.  For 
the  Ohio  region,  the  average  for  the  merino  sheep  there  investi- 
gated was  similarly  made  up  from  figures  mounting  to  forty-two 
cents  at  the  highest  and  falling  to  six  cents  at  the  lowest.1  The 
simple  fact  is  that  wool  growing  in  some  parts  of  the  United 
States  is  carried  on  under  advantageous  conditions,  —  as,  for 
example,  in  the  dry  southwestern  districts  where  the  climatic 
conditions  are  favorable  for  merino  sheep  and  for  nothing  else; 2 
while  in  other  parts  of  the  country,  as  for  example  in  the  Ohio 
region,  the  conditions  are  distinctly  disadvantageous.  The 
lesson  even  for  the  staunch  protectionists  was  obvious:  the 
favorite  formula  of  "  equalizing  cost  of  production  "  could  not 
be  applied  in  this  case.  And  the  lesson  for  the  staunch  free 
trader  was  equally  obvious:  there  was  no  ground  for  fostering  a 
domestic  supply  of  wool  produced  at  high  cost,  and  no  ground  for 
worry  about  the  consequences  of  abolishing  the  duty  as  regards 
the  wool  produced  at  low  cost. 

The  contrast  between  the  last  two  groups,  —  the  Ohio  region 
with  a  "  cost  "  of  nineteen  cents,  and  other  parts  of  the  north 
central  region  with  a  "  cost  "  of  nothing  at  all,  —  brings  out  most 
strikingly  the  differences.  When  it  was  figured  out  that  for 
cross-bred  sheep  kept  in  connection  with  general  farming  the 
wool  cost  nothing  at  all,  the  fact  simply  was  that  the  proceeds 

1  See  the  analysis  of  the  Tariff  Board's  figures  made  by  Mr.  W.  S.  Culbertson 
(who  had  been  himself  a  member  of  the  Board)  in  American  Economic  Review, 
March,  1013,  p.  66.  It  should  be  added  that  for  the  Ohio  region,  though  the 
variation  from  extreme  to  extreme  was  great,  most  of  the  figures  fell  within  a  smaller 
range  (12  to  27  cents).  For  the  western  region,  however,  the  varying  figures  of 
cost  were  distributed  from  highest  to  lowest  without  noticeable  concentration  in  a 
middle  range. 

2  "  The  Southwest  is  still,  as  it  has  always  been,  the  home  of  the  range  merino. 
But  little  of  the  mutton  blood  has  been  introduced  into  the  flocks  of  this  region, 
and  the  indications  are  that  for  obvious  reasons,  —  climate,  range,  etc.,  —  these 
conditions  will  continue  to  exist  for  many  years  to  come."  Tariff  Board  Report, 
p.  602. 


3  l6         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

from  mutton  covered  all  separable  expenses  incurred  for  the 
sheep,  such  as  feeding,  care,  and  the  like.  Both  wool  and  sheep 
were  a  by-product  (joint  product)  of  general  farming,  and  the 
"  cost  "  of  wool  was  more  distinctly  a  derived  cost,  and  even 
more  elusive,  than  in  the  ordinary  cases  of  joint  cost.  In  what- 
ever way  calculated,  however,  it  could  not  be  more  than  nominal. 
On  the  other  hand,  there  were  in  the  Ohio  region  farmers  who 
clung  with  a  certain  obstinacy  to  rearing  merino  sheep  solely  for 
their  heavy  fleece  of  short  fine  wool.  Much  of  the  land  so  used 
seems  to  have  been  not  easily  available  for  general  agricultural 
purposes.  But  much  of  it  was  turned  to  wool  growing  of  this 
sort  through  persistent  habit,  and  also,  of  course,  through  the 
influence  of  the  duty  on  wool.  The  indications  were  that  where 
the  breeding  was  chiefly  or  largely  for  mutton  (cross-breds) ,  even 
farms  on  which  sheep  and  wool  were  the  main  products  were  little 
affected  by  the  price  of  wool  or  the  wool  duty.  But  as  regards 
farming  chiefly  for  merino  wool,  it  was  found  that  "  the  highest 
average  cost  of  production  of  such  wool  in  the  world  is  in  the  state 
of  Ohio  and  contiguous  territory";  which  from  the  unflinch- 
ing protectionist  point  of  view  may  be  a  reason  for  maintaining 
a  high  duty  on  wool,  but  to  the  free  trader  seems  a  conclusive 
ground  for  not  endeavoring  to  stimulate  its  domestic  production 
at  all.1 

One  other  phase  of  the  wool  situation  deserves  attention.  It 
was  pointed  out,  in  the  first  part  of  this  chapter,  that  the  ortho- 
dox formula  (so  it  may  be  called)  for  ascertaining  the  national 

1  The  sentence  quoted  is  from  the  Tariff  Board  Report,  p.  10.  On  the  Ohio 
situation  in  general,  see  pp.  548  seq.  A  certain  note  of  impatience  with  the  merino 
wool  producers  of  this  region  is  discernible  in  the  Report.  After  pointing  out  that 
well-managed  sheep  farms  on  which  wool  was  not  the  chief  source  of  income  rarely 
failed  to  show  a  profit,  the  Report  goes  on  (p.  548) :  "  Why,  then,  do  not  all  of  the 
sheep  breeders  of  the  Ohio  valley  follow  this  system  ?  The  answer  is  that  on  hill 
farms  especially  it  is  not  easy  to  grow  the  corn  necessary  to  fatten  lambs.  Then, 
the  owners  of  many  flocks  have  not  learned  to  adapt  their  systems  of  agriculture  to 
this  practice;  they  have  long  been  accustomed  to  looking  to  wool  for  their  chief 
profit  from  sheep  breeding."  The  truth  seems  to  be  that  this  sort  of  wool  growing 
was  a  survival  from  the  frontier  days  of  Ohio,  maintained,  precariously  and  beyond 
its  time,  first  by  the  civil  war  demand  for  wool  and  then  by  the  high  duties.  Cf. 
Wright,  pp.  148,  183,  247- 


wool  3 i 7 

loss  from  protection  seems  in  this  case  applicable;  due  allowance 
being  made  for  the  complication  arising  from  skirted  wool.1  Im- 
ports continue,  in  quality  similar  to  the  domestic  product.  There 
are  no  complications  from  exceptional  conditions  of  transporta- 
tion or  of  geographical  distribution.  Apply  then  the  formula; 
multiply  the  domestic  product  by  the  full  (effective)  rate  of  duty; 
and  you  have  the  national  loss.  The  assumptions  underlying  this 
sort  of  inference  are  two :  first  that  the  domestic  price  is  in  fact 
raised  by  the  duty,  —  and  this  cannot  be  doubted;  second  that 
the  foreign  price  will  maintain  itself  at  the  same  level  after  aboli- 
tion of  the  duty.  The  second  assumption  raises  a  debatable 
question.  It  may  be  asked,  will  not  the  foreign  price  itself  be 
raised,  in  consequence  of  the  additional  pressure  on  foreign 
sources  of  supply  due  to  increased  importations  into  the  United 
States  ?  We  may  disregard  that  crude  form  of  the  contention 
which  looks  simply  to  temporary  results.  Whenever  a  duty  is 
remitted,  the  immediate  effect  is  greater  resort  to  foreign  supplies 
and  some  rise  in  foreign  prices.  As  time  goes  on,  however,  for- 
eign prices  will  ordinarily  be  reduced  to  their  former  level;  and 
then  the  full  benefit  of  remission  of  taxation  will  inure  to  the 
domestic  purchaser.  There  is  the  possibility,  however,  that  the 
enlargement  of  the  foreign  supply  will  take  place  in  the  face  of 
obstacles,  —  with  increasing  costs,  diminishing  returns.  There 
may  be  pressure  upon  limited  sources  of  supply,  resort  to  less 
advantageous  sources,  and  consequently  some  permanent  en- 
hancement of  price.  The  case  is  familiar  in  economic  theory :  an 
increase  in  demand  for  a  commodity  produced  under  conditions 
of  diminishing  returns  causes  a  permanent  advance  in  normal 
price. 

It  appears,  however,  that  this  result,  though  quite  within  the 
bounds  of  theoretic  possibility,  is  not  likely  in  fact  to  ensue;  and 
this  because  of  the  expansibility  of  the  supply  from  the  one  region 
which  is  most  important,  —  Australia.  During  the  last  two  gene- 
rations the  extraordinary  extension  of  grazing  into  frontier 
regions  seems  to  have  well-nigh  exhausted  the  other  available 
areas.     South  Africa,  necessarily  limited  in  productive  capacity 

1  See  p.  306,  above. 


318         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

by  an  unusually  arid  climate,  apparently  has  reached  its  limit.  In 
Argentina  a  development  seems  to  have  taken  place  essentially 
similar  to  that  which  has  already  taken  place  in  our  Missis- 
sippi valley.  The  plow  is  displacing  the  ranch;  settled  agri- 
culture succeeds  grazing.  And  grazing  itself  is  found  more 
profitable  for  cattle  than  for  sheep.  What  with  the  competition 
of  grain  and  of  cattle,  the  wool  clip  of  Argentina  seems  likely  to 
diminish  rather  than  to  increase.  But  in  the  interior  of  Australia 
a  large  extension  of  supply  may  be  expected  without  an  increase 
in  cost.  Wool  production  in  that  vast  area  is  declared  by  obser- 
vers who  are  competent,  and  who  cannot  be  supposed  to  have  a 
bias  against  the  maintenance  of  our  wool  duties,  to  be  susceptible 
of  very  considerable  expansion.  It  would  seem  that  from  this 
region  additional  quantities  can  be  procured  without  resort  to 
poorer  natural  resources,  and  consequently  at  costs  and  prices 
similar  to  those  which  have  prevailed  in  the  past.  The  Austra- 
lian interior,  it  is  true,  is  fickle,  because  of  the  narrow  margin  of 
safety  in  its  precipitation.  The  rainfall  is  so  scant  that  a  slight 
deficiency  causes  immense  losses  among  the  sheep.  A  year  or 
two  of  drought  in  Australia  affects  the  wool  supply  of  the  whole 
civilized  world,  and  so  the  course  of  wool  prices.  A  conjuncture 
of  Australian  drought  with  the  abolition  of  American  wool  duty 
might  bring  it  about  that  for  the  time  being  the  American  pur- 
chaser would  experience  no  lowering  of  prices.  But  in  the  long 
run,  and  under  the  normally  prevalent  conditions,  this  combina- 
tion of  circumstances  cannot  be  regarded  as  probable.  The 
Tariff  Board,  in  the  same  sentence  in  which  it  declared  our  Ohio 
region  to  be  the  most  expensive  region  in  the  world  for  producing 
wool,  declared  Australia  to  be  the  least  expensive  in  the  world; 
and  there  appears  to  be  no  reason  for  anticipating  that  under 
altered  conditions  of  demand  it  will  cease  to  be  the  least  expensive 
source  of  supply,  —  that  is,  the  most  advantageous.1 

There  is,  however,  another  qualification,  of  some  practical  as 
well  as  theoretic  significance,  which  must  be  attached  to  the 

1  See  Tariff  Board  Report,  p.  10.  The  possibilities  of  increase  in  foreign  supplies 
are  considered  in  the  Report  at  pp.  490,  522  et  passim.  There  were  in  1910  less 
than  one  hundred  million  sheep  in  Australia;  it  is  supposed  the  number  can  be 
increased  without  difficulty  to  at  least  one  hundred  and  fifty  million  (p.  492). 


WOOL  319 

general  conclusion  concerning  the  "  national  loss  "  ascribable  to 
the  wool  duty.  It  results  from  the  great  variety  in  the  condi- 
tions under  which  the  domestic  wool,  not  the  foreign,  is  grown; 
it  is  one  which  must  be  borne  in  mind  whenever  a  raw  material,  — 
a  commodity  belonging  to  the  extractive  group,  —  is  subjected 
to  a  protective  duty.  A  part  of  the  domestic  output  of  such  a 
commodity  is  likely  to  be  produced  within  the  protecting  country 
so  advantageously  that  it  would  hold  its  place  even  without  the 
duty.  Not  the  whole  output  then  leans  on  protection,  but  only 
the  part  which  is  made  under  less  advantageous  conditions.  But 
to  this  latter  part  alone  can  we  apply  the  reasoning  about  national 
loss.  Here,  and  here  only,  is  it  true  that  the  consumer  is  taxed, 
and  that  the  producer  yet  does  not  profit;  that  the  extra  price 
which  the  duty  enables  the  producer  to  get  merely  enables  him 
to  carry  on  operations  he  would  not  otherwise  turn  to.  As 
regards  the  domestic  producers  who  would  carry  on  the  same 
operations  in  any  case,  there  is  nothing  in  the  nature  of  a 
national  loss ;  there  is  merely  transfer  from  one  pocket  to  another. 
What  the  consumer  pays  to  them  in  the  way  of  enhanced  price, 
they  really  gain.  Under  these  conditions,  and  to  this  extent, 
there  is  some  justification  for  saying  that  protection  robs  Peter 
to  pay  Paul.  But,  by  the  same  token,  the  free  trader  is  not 
justified  in  saying  that  under  these  conditions  there  is  wasteful 
diversion  of  industry  from  the  more  profitable  channels  into  the 
less.  There  may  be  unjustifiable  taxing  of  one  set  of  persons  for 
the  advantage  of  another  set,  —  whether  it  is  deemed  unjustifi- 
able must  depend  on  one's  convictions  regarding  the  general 
benefit  or  lack  of  benefit  from  protection.  But  there  is  only  a 
transfer  from  one  to  another,  no  net  economic  loss.  In  this 
direction  the  reasoning  about  the  economic  loss  from  a  duty 
like  that  on  wool  must  be  qualified.1 

From  this  sketch  of  the  history  and  conditions  of  domestic  and 
foreign  production,  it  will  be  seen  that  wool  growing  in  the 
United  States  is  partly  an  industry  depending  upon  tariff  sup- 
port, and  partly  not.     The  keeping  of  sheep  as  a  by-product  of 

1  Compare  what  was  said  in  chapter  i,  pp.  14  seq.,  on  extractive  commodities, 
and  in  chapter  v,  p.  63,  on  the  Hawaiian  sugar  situation. 


320        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

general  farming  will  be  continued  whether  or  no  there  be  a  duty 
upon  wool.  The  trend  toward  mutton,  and  the  diminution 
of  sheep  raising  with  a  view  primarily  to  wool,  are  inevitable. 
In  the  pastoral  region  of  the  west,  cattle  will  displace  sheep  in 
the  long  run  wherever  the  climate  and  the  lay  of  the  land  make 
possible  the  change.  Wool  growing  of  the  sort  which  long  held 
its  own  in  the  Ohio  region  was  an  artificial  industry,  probably 
unable  to  hold  its  own  even  against  the  stress  of  domestic  forces, 
and  almost  sure  to  give  way  in  face  of  unfettered  foreign  competi- 
tion. Yet  even  under  free  wool  a  considerable  clip  is  likely  to 
be  forthcoming  in  the  United  States.  Partly  it  will  be  derived 
from  many  small  flocks  of  sheep  maintained  in  connection  with 
general  farming;  supplies  of  this  sort  will  probably  increase  as 
agriculture  becomes  more  intensive.  Partly  it  will  come  from 
those  regions  in  the  arid  west  which  are  not  suitable  for  cattle 
and  can  be  used  for  sheep  only. 

Surveying  the  situation  as  a  whole,  it  is  difficult  to  see  any 
ground  for  the  maintenance  of  duties  upon  wool,  except  that  of 
extreme  and  even  fanatical  protectionism.  The  arguments  to 
which  economists  give  a  respectful  hearing  are  not  applicable. 
There  can  be  no  question  of  protection  to  young  industries.  The 
physical  and  industrial  obstacles  which  stand  in  the  way  of  com- 
plete supply  of  the  market  from  domestic  sources  are  unalterable. 
It  is  the  steady  and  growing  strength  of  these  forces  which  ex- 
plains the  increase  in  the  imports  of  wool  after  1900  in  face  of 
high  duties.  Neither  do  any  social  or  political  arguments  tell 
in  favor  of  duties  on  raw  wool.  It  is,  indeed,  conceivable  that 
political  or  social  disadvantages  may  be  alleged  to  ensue  from 
complete  reliance  on  foreign  sources  of  supply  for  this  impor- 
tant material.  Yet  it  is  striking  that  even  in  Germany,  where 
most  stress  has  been  laid  on  considerations  of  this  kind,  absolute 
dependence  on  imported  wool  is  accepted  by  all  parties  with 
equanimity.1  So  far  as  the  United  States  are  concerned,  how- 
ever, the  question  is  merely  one  of  more  or  less.      Even  under 

1  In  1898  Germany  imported  ten  times  as  much  wool  as  was  produced  at  home 
(177  mill,  kilograms  against  17  mill.).  Michaelis,  in  Handbuch  der  Wirtschafts- 
kutide  Deutschlands,  vol.  iii,  p.  629. 


\ 


WOOL  321 

free  wool,  the  domestic  supply  will  not  disappear;  it  will  simply 
shrink  to  smaller  dimensions.  To  repeat,  the  only  grounds  on 
which  a  wool  duty  can  be  defended  are  those  of  a  crass  mercan- 
tilism: that  the  international  division  of  labor  brings  no  gain, 
importation  in  itself  means  loss.  If  foreign  supply  is  admitted 
ever  to  be  advantageous,  it  must  be  so  in  the  case  of  wool. 


CHAPTER  XX 

THE  WOOLEN  MANUFACTURE.    THE  COMPENSATING 
SYSTEM;   WOOLENS  AND  WORSTEDS 

The  main  products  of  the  woolen  manufacture  are  woolen  and 
worsted  fabrics,  and  to  these  attention  will  be  given  in  the 
present  chapter.  To  them  the  much-discussed  compensating 
system  was  applied,  as  indeed  it  was  to  all  woolen  products. 
That  system,  though  initiated  as  early  as  1861,  was  not  fully 
developed  until  the  passage  of  the  wool  and  woolens  tariff  act 
of  1867.  As  then  elaborated,  it  remained  in  operation  without 
essential  changes  (barring  the  years  1894-97)  until  1913.  The 
questions  that  arise  regarding  the  effects  of  protection  on  the  in- 
dustry cannot  be  followed  without  some  understanding  of  the 
method  by  which  the  woolen  manufacturers  were  "  compen- 
sated "  for  the  charges  laid  on  them  through  the  wool  duties. 
The  whole  system,  be  it  remembered,  was  swept  away  in  19 13. 
The  very  fact  that  this  episode  in  protection  is  closed,  at  least 
for  the  time  being,  makes  its  study  profitable.1 

In  essence,  the  system  was  simple.  A  duty  on  wool  raises  the 
price  of  that  material  for  the  American  manufacturer.  He  is 
compelled  to  pay  more  for  it  than  is  his  foreign  competitor.  To 
equalize  the  competition  between  domestic  and  foreign  manu- 
facturers, a  duty  should  be  levied  on  imported  woolens  equiva- 
lent to  the  increased  price  of  wool  used  in  making  domestic 
woolens.  In  the  same  way,  —  to  state  an  analogous  case,  —  if 
an  internal  tax  is  put  on  a  commodity,  an  equal  tax  should  be 
put  on  the  same  commodity  when  imported;  otherwise  the  im- 
porter would  be  given  an  advantage,  and  would  undersell  the 
domestic  producer.  Once  a  duty  was  imposed  on  wool,  an 
equivalent  duty  was  clearly  called  for  on  woolens,  —  known  in 
this  case  as  the  compensating  duty. 

1  On  the  history  of  the  compensating  system  I  have  summarily  repeated  here 
what  is  said  more  fully  in  my  Tariff  History  of  the  United  States,  where  the  various 
modifications  of  the  system  are  described  in  detail  for  the  successive  tariff  acts. 

322 


WOOLENS  AND  WORSTEDS  323 

The  compensating  duty  on  woolens  was  fixed,  in  general,  on 
the  supposition  that  it  required  four  pounds  of  wool  to  make  one 
pound  of  cloth.  This  large  proportion,  always  surprising  to  per- 
sons not  cognizant  of  the  peculiarities  of  the  industry,  is  due 
mainly  to  the  amount  of  fatty  matter  contained  in  wool  as  it 
comes  from  the  sheep's  back.  In  the  scouring  process,  most 
wool  loses  at  least  one-half  of  its  weight.  Often  the  loss  is  two- 
thirds,  sometimes  even  four-fifths;  though  it  is  true  that  there 
are  grades  of  wool  on  which  the  loss  is  considerably  less  than 
half.  It  is  not  feasible  to  take  into  account  the  variations  in 
shrinkage  by  fixing  a  different  compensating  duty  for  each  several 
kind  of  cloth;  some  general  average,  a  fair  approximation  to  the 

I*  usual  shrinkage,  must  be  made  the  basis.  The  kind  of  wool  most 
largely  used  in  the  United  States  in  1867,  when  the  system  was 
put  in  the  shape  which  proved  permanent,  lost  about  two-thirds 
of  its  weight  in  scouring;  the  same  was  the  case  with  the  wool 
which  was  then  expected  to  be  imported.  Further  allowance 
had  to  be  made  for  some  wastage  of  the  fibre  in  the  manufactur- 
ing process.  The  upshot  was  that  four  pounds  of  wool  were 
reckoned  to  be  needed  for  making  one  pound  of  cloth.  If,  there- 
fore, the  duty  on  wool  was  eleven  cents  a  pound,  a  duty  on  foreign 
cloths  of  four  times  that  amount  (forty-four  cents  a  pound  on  the 
cloth)  would  put  the  foreign  manufacturer  who  used  four  pounds 
of  similar  wool  in  the  same  position  as  the  domestic  manufacturer 
who  also  used  them  and  paid  duty  on  them. 

A  figure  not  far  from  this  (forty-four  cents  a  pound)  appeared 
as  compensating  duty  on  woolen  cloths  in  all  the  protective  tariff 
acts  from  1867  to  1909.  Some  changes  and  readjustments  were 
made  from  time  to  time.  At  the  very  start,  in  1867,  the  com- 
pensating figure  was  swelled,  in  order  to  offset  some  internal  taxes 
then  still  left  over  from  the  civil  war  levies,  though  abolished 
shortly  afterwards.  In  1883,  when  the  general  trend  was  toward 
abating  somewhat  the  high  range  of  duties,  the  figure  was  re- 
duced to  thirty-five  cents;  the  duty  on  wool  itself  being  also  re- 
duced slightly  in  that  year.  In  1890,  a  differentiation  was  made. 
Cheap  goods,  it  was  admitted,  used  less  wool  (some  admixture  of 
cotton)  and  less  expensive  wool,  than  dearer  goods;  the  compen- 


324         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

sating  duty  was  accordingly  graded,  from  thirty-three  cents  on 
the  cheapest  goods  to  forty-four  cents  on  the  dearest.  In  the 
tariff  acts  of  1897  and  1909  no  change  of  note  was  made  in  the 
compensating  figures.  On  the  whole,  the  changes  in  the  several 
tariffs  brought  no  serious  modification  of  the  general  system 
based  on  the  ratio  of  four  to  one. 

Over  and  above  this  compensating  duty  came  the  protective 
duty  proper.  The  former  simply  put  the  manufacturer  in  the 
same  position,  relatively  to  his  foreign  competitor,  as  if  he,  like 
the  foreigner,  secured  his  wool  free;  it  gave  him  no  favor.  But 
the  essence  of  the  protective  system  is  to  favor  the  domestic  pro- 
ducer. An  additional  duty  was  therefore  imposed  on  foreign 
woolens,  which  was  designed  to  be  the  protecting  element  in  the 
combination,  and  the  sole  protecting  element.  This  additional 
or  protecting  duty  was  always  ad  valorem.  In  1867,  the  manu- 
facturers who  framed  the  scheme  modestly  alleged  that  they 
wished  a  net  protection  of  but  25  per  cent;  this  had  been  the 
rate  fixed  in  1861,  just  before  the  civil  war.  To  be  sure,  the 
actual  duty  requested  and  secured  in  1867  was  not  25  per  cent, 
but  35  per  cent,  because  allowance  was  asked  here,  as  in  the  case 
of  the  compensating  duty  itself,  for  some  additional  charges  due 
to  the  internal  taxes  of  the  war.  But  this  moderation  soon  was 
forgotten;  the  supposed  standard  of  a  net  protection  amounting 
to  no  more  than  25  per  cent  was  early  put  aside.  If  one  cared 
to  use  an  analogy  from  biology,  one  might  say  that  in  the  pro- 
pitious environment  a  rapid  development  took  place  from  the 
original  form,  until  a  variety  was  evolved  which,  though  like  its 
ancestor  in  structure,  quite  out-topped  it  in  size.  The  ad  valorem 
or  protecting  duty  not  only  was  retained  at  35  per  cent  long  after 
all  the  special  war  charges  had  disappeared,  but  was  increased 
(on  all  but  the  cheaper  goods)  to  40  per  cent  in  1883,  to  50  per 
cent  in  1890,  and  to  55  per  cent  in  1897  and  1909.  The  increase 
and  accentuation  of  protection  was  nowhere  more  striking  than 
in  the  woolens  schedule. 

In  its  application  to  a  considerable  number  of  fabrics,  the  com- 
pensating system  lost  some  of  that  simplicity  which  it  had  when 
both  cloth  and  wool  were  subjected  to  specific  duties  on  the 


WOOLENS  AND  WORSTEDS  325 

same  basis,  —  that  is,  by  the  pound.  It  was  not  deemed  feasible 
to  apply  the  pound  duty  to  all  woolens.  Dress  goods,  —  for 
example,  lighter  fabrics  for  women,  —  were  made  dutiable  by 
the  yard;  a  fixed  sum  per  yard  was  calculated  which  was  sup- 
posed to  be  equivalent  to  the  higher  price  of  wool  used  by  the 
domestic  manufacturer  in  producing  a  yard  of  such  dress  goods. 
Similarly  the  compensating  duties  on  carpets  were  fixed  by  the 
yard,  not  by  the  pound.  These  adjustments,  already  compli- 
cated in  the  tariff  act  of  1867,  became  still  more  so  in  the  later 
acts;  until  schedule  K  became  extraordinarily  intricate,  full  of 
compensations  based  on  approximations  twenty  or  thirty  years 
behind  the  times,  inviting  attack,  yet  difficult  to  reconstruct 
without  danger  of  collapse  to  the  entire  edifice.1 

Throughout,  in  sum,  there  was  the  system  of  double  duties: 
specific  duties  by  the  pound  (in  some  cases  by  the  yard)  which 
constituted  "  compensation  "  for  the  effect  of  the  duties  on  the 
raw  wool;  and  superimposed  on  them,  ad  valorem  duties,  reach- 
ing at  the  maximum  55  per  cent,  which  were  alone  supposed  to 
give  protection.  What  now  was  the  real  weight  of  the  duties, 
the  real  outcome  of  the  system  ?     What  was  the  degree  of  pro- 

1  The  development  of  the  system  is  shown  by  the  following  figures,  which  state 

the  duties  on  "  woolen  cloths,"  the  typical  class  of  goods  and  the  one  still  most 

important  in  Schedule  K. 

Duty  on  Woolen  Cloth 


Duty  on  Wool, 

Compensating  (Specific) 

Protective 

Year 

Per  Pound 

Per  Pound 

ad  valorem 

1861 

3C 

12c. 

2S% 

1864 

6c. 

24c. 

40% 

1867 

I2C. 

50c. 

35% 

1883 

IOC. 

Costing  up  to  80c.  per  lb.,  35c. 

35% 

"       over     80c.      "        350 

40% 

1890 

1IC. 

Costing  up  to  30c.  per  lb.,  33c. 

40% 

■       30  @  40c.        "        38k. 

40% 

"       over     40c.      "        44c. 

50% 

1894 

Free 

No  compensating  duty 

Costing  up  to  50c.  per  lb.,  40% 
"        over    50c.      "        5°% 

1897 

IIC. 

Costing  up  to  40c.  per  lb.,  33c. 

50% 

"       40  @  70c.      "        44c. 

50% 

"       over     70c.      "        -14c. 

55% 

1909 

IIC. 

Same  duties  as  in  1897 

Same  duties  as  in  1897 

1913 

Free 

No  compensating  duty 

35% 

The  wool  duty  is  here  stated  approximately;  for  details  see  the  table  given  above, 
p.  297.  On  the  splitting  of  the  compensating  duty  which  begins  in  1883  and  is 
maintained  until  1913,  see  p.  330  below. 


326         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

tection  actually  given  the  wool  manufacturers  ?  These  questions 
must  be  answered  before  proceeding  to  the  further  and  more  im- 
portant question  of  the  economic  consequences. 

It  is  probable  that  the  compensating  duties  were  fixed  at  the 
outset  in  good  faith  and  with  sufficient  accuracy.  The  charge 
was  often  made,  by  those  free  traders  who  see  nothing  but  rob- 
bery and  corruption  in  the  protective  system,  that  they  were 
manipulated  from  the  start.  No  doubt  the  manufacturers  whose 
calculations  were  then  used  made  sure  that  the  compensating 
figures  were  quite  high  enough;  but  there  seems  to  have  been 
no  deliberate  manipulation  on  the  staple  goods,  and  probably  no 
serious  excess.1  But  as  time  went  on,  the  system  got  completely 
out  of  gear.  The  compensating  duties,  so  far  from  being  merely 
sufficient  for  their  avowed  purpose,  came  to  be  very  much  more 
so.  In  consequence,  the  duties  on  woolens  as  a  whole  proved 
to  be  so  much  higher  than  the  supposed  and  avowed  rate  of 
protection  as  to  reach  the  extreme  height  in  the  entire  tariff 
system.  They  became  the  particular  object  of  attack  by  its 
opponents;  and  they  served  as  still  another  illustration  of  the 
difficulty  of  ascertaining  the  real  effect  of  duties  that  are  quite 
prohibitory  to  importation. 

For  this  divergence  between  plan  and  outcome  there  were 
several  causes.  Attention  has  already  been  called  to  those 
which  must  be  considered  in  gauging  the  effect  of  the  wool  duty 
itself.  It  did  not  in  fact  cause  all  domestic  wool  to  rise  in  price 
by  the  full  amount  of  the  duty.  It  was  quite  natural  that  the 
framers  of  the  compensating  system  should  have  proceeded  on 
the  assumption  that  it  would;  not  only  because  the  assumption 
underlies  the  usual  discussions  of  protection,  but  because  the 
circumstances  of  the  time  (1865-70)  doubtless  warranted  it.  But, 
as  we  have  seen,  the  domestic  wool  clip  grew  rapidly  during  the 
years  1870-1885,  and  imports  were  comparatively  small;    and 

1  This  I  judge  to  have  been  the  case,  at  all  events,  as  regards  woolen  cloths  of 
the  kind  chiefly  made  at  that  time  within  the  country.  The  compensating  duties 
on  dress  goods  (levied  by  the  yard,  and  not  by  the  pound,  and  therefore  not  easily 
subject  to  check)  seem  to  have  been  designedly  excessive  even  from  the  start.  See 
the  Tariff  Board  Report,  p.  148.  Cf.  ibid.,  p.  184,  for  a  curious  manipulation  and 
increase  in  the  duty  on  rugs  in  1897,  —  fairly  to  be  dubbed  a  "  joker." 


WOOLENS  AND  WORSTEDS  327 

during  these  years  there  was  probably  a  difference  between  the 
quality  of  the  imported  wool  and  most  of  that  grown  within  the 
country.  And  in  later  years  also  a  difference  of  the  same  sort 
persisted.  It  is  true  that  after  1890  the  domestic  supply  re- 
mained on  the  whole  stationary,  while  the  imports  increased; 
true  also  that  the  intrinsic  qualities  of  the  two  ceased  to  show  con- 
siderable differences.  But  the  "  skirted  wool  "  complication  set 
in  after  1890.  Its  consequence  was,  as  already  noted,  that  im- 
ported wool,  in  the  form  in  which  it  came  to  market,  was  better 
in  quality  than  domestic;  the  latter  accordingly  did  not  rise  in 
price  by  the  full  amount  of  the  duty  on  foreign  wool.1  Except 
for  some  special  wools,  used  for  particular  grades  of  cloth,  it  was 
probably  never  true  that  the  American  manufacturer  when  buy- 
ing domestic  wool  (that  is,  for  the  great  bulk  of  his  purchases) 
was  handicapped  as  against  the  foreigner  by  the  wool  duty  to  its 
full  extent. 

Even  more  important,  and  also  of  special  effect  during  the 
later  years,  was  the  change  in  the  character  of  the  wool  commonly 
used.  This  again  was  a  consequence  of  the  great  change  in  the 
woolen  manufacture  itself  to  which  attention  will  presently  be 
given,  —  the  transition  from  woolens  to  worsteds.  It  led  to 
greater  use  of  combing  and  cross-bred  wools,  and  less  use  of  cloth- 
ing wools.  The  latter,  it  happens,  have  the  highest  shrinkage, 
and  alone  justify  the  four-to-one  basis  of  calculation.  The  strict 
combing  wools,  from  sheep  of  the  pure  English  breed,  shrink  at 
the  most  30  per  cent,  often  as  little  as  18  or  20;  cross-bred  wools 
a  little  more,  but  rarely  in  excess  of  33  per  cent.  Merino  wools 
(clothing  wools  in  the  strictest  sense)  alone  shrink  as  much  as 
60  per  cent ;  on  some  of  these  the  scoured  wool  content  goes  even 
as  low  as  25  per  cent,  i.  e.,  75  per  cent  is  lost  in  scouring.2  When 
the  compensating  system  was  established,  the  woolen  manu- 
facture was  engaged  almost  exclusively  on  "  cloths,"  and  was 

1  Cf.  what  was  said  in  the  preceding  chapter,  p.  306. 

2  See  the  excellent  generalized  statement  in  the  Tariff  Board  Report,  Sum- 
mary, p.  12.  Elsewhere  (p.  89)  it  is  remarked  that  "  a  fleece  from  an  Angora  goat 
or  Lincoln  sheep  may  shrink  in  scouring  only  10  or  20  per  cent,  leaving  80  or  90 
per  cent  of  clean  wool;  a  Cape  or  Australian  merino  fleece,  on  the  contrary,  may 
shrink  as  high  as  50  to  70  per  cent,  yielding  only  50  to  30  per  cent  of  clean  wool." 


328         SOME  ASPECTS  OF  THE   TARIFF  QUESTION 

using  almost  exclusively  merino  wool  subject  to  shrinkage  of  60 
per  cent  or  more.  But  in  proportion  as  the  worsted  branch  of 
the  manufacture  grew,  and  the  older  branch  of  the  industry  itself 
used  more  and  more  of  cross-bred  wool,  the  computations  of  the 
compensating  system  became  quite  inapplicable  to  the  prevalent 
conditions.  And  yet  there  remained  parts  of  the  woolen  industry 
to  which  those  computations  did  remain  applicable,  and  for  which 
the  four-to-one  adjustment  was  barely  sufficient  for  equalization, 
occasionally  even  less  than  sufficient.  Some  very  fine  wools 
are  extremely  "  heavy,"  i.  e.,  contain  a  great  proportion  of 
grease;  and  not  only  four  pounds  of  such  wool,  but  more, 
are  used  in  making  a  pound  of  (say)  fine  broadcloth.  The  rigid 
simplicity  of  the  compensating  was  quite  out  of  accord  with  the 
great  variety  and  complexity  of  the  industrial  conditions.1 

1  It  was  by  parading  the  exceptional  cases  that  the  representatives  of  the  woolen 
manufacturers  were  able  in  later  years  to  make  a  show  of  validity  for  the  basis 
of  four  to  one  in  the  compensating  system.  See,  for  example,  their  statement 
before  the  Ways  and  Means  Committee  in  1909;  Tar  if  Hearings  of  ipop,  p.  7257. 
The  stubbornness  of  the  Association  of  Wool  Manufacturers  in  clinging  not  only 
to  the  principle  but  the  details  of  the  act  of  1867  (they  interposed  a  veritable 
non  possumus  to  all  proposals  for  change)  must  be  regarded  as  a  strange  piece  of 
political  ineptitude.  As  late  as  191 1,  the  President  of  the  American  Woolen 
Company  made  the  following  extraordinary  statement  in  an  address  to  his  fellow- 
manufacturers:  "  Schedule  K,  much  maligned,  much  misunderstood,  if  properly 
understood  would  be  the  most  appreciated  of  any  schedule  in  the  tariff;  and  if  all 
schedules  in  the  tariff  were  as  scientifically  based  and  as  well  poised  and  balanced 
as  Schedule  K,  it  would  be  the  most  remarkable  document,  next  to  the  Constitution 
of  the  United  States,  that  the  human  mind  has  ever  produced  "!  I  quote  from  a 
pamphlet  reprint  of  the  address. 

I  have  not  referred  in  the  text  to  another  episode  which  played  a  considerable 
part  in  the  attacks  on  Schedule  K.  Throughout  the  period  of  wool  duties,  the 
ordinary  or  normal  duty  (about  eleven  cents  a  pound)  was  double  on  wool  which 
had  been  washed,  and  triple  on  wool  scoured.  Hence  most  imports  were  of  un- 
washed wool.  But  on  combing  wool  (class  II)  the  duty  was  the  same  whether 
washed  or  unwashed;  though  still  triple  when  scoured.  Hence  wool  of  class  II  was 
almost  always  imported  in  the  washed  state.  This  exceptional  treatment  of  comb- 
ing wool  was  the  occasion  of  not  a  little  controversy.  It  was  sought  to  be  justified 
on  the  ground  that  such  wool  in  fact  was  almost  always  washed  on  the  sheep's  back, 
and  could  not  well  be  imported  in  any  other  condition;  and  also  justified  frankly  on 
the  ground  that  in  1867,  when  the  exception  was  instituted,  the  branch  of  the  ( 

manufacture  using  such  wool  (the  worsted  branch)  was  of  small  dimensions  and  in 
its  early  stages,  and  so  deserving  of  special  consideration.  In  any  case,  the  dis- 
crimination proved  of  less  importance  than  might  have  been  expected,  because 


WOOLENS  AND  WORSTEDS  329 

Another  circumstance  that  contributed  much  to  the  misfit 
was  the  large  use  of  substitutes  or  adulterants.  This  took  place 
more  particularly  in  the  woolen  branch  of  the  industry.  It  was 
in  the  worsted  branch  that  the  low  shrinkage  of  the  wool  served 
most  to  make  the  compensation  excessive;  in  the  other  and 
older  branch  it  was  the  extensive  use  of  substitutes  for  wool. 
Chief  among  these  are  shoddy,  noils,  cheap  grades  of  wool,  cotton. 
Shoddy  is  the  wool  fibre  got  from  woolen  rags  torn  to  pieces;  by 
no  means  so  worthless  as  is  implied  by  the  familiar  connotation 
of  the  word,  but  still  poorer  and  cheaper  than  wool.  Noils  are 
short  fibres  culled  from  the  longer  fibres  of  combing  wool  in  the 
process  of  combing.1  Different  both  from  shoddy  and  noils  in 
not  being  a  second-hand  or  quasi-discarded  product,  yet  of  simi- 
lar significance  for  the  compensating  system,  are  the  cheaper 
grades  of  wool  which  the  tariff  system  classed  as  carpet  wool  and 
admitted  at  rates  of  duty  lower  than  those  on  the  other  wools. 
Though  most  of  this  wool  was  in  fact  used  in  the  carpet  manu- 
facture, a  substantial  amount  was  and  is  used  in  making  the 
cheaper  grades  of  woolen  cloths.  Last  but  not  least  among  the 
substitutes  is  cotton,  which  forms  the  warp  in  many  of  the  cheaper 
woolens  and  worsteds.2 

There  was  much  foolish  recrimination  between  free  traders  and 
protectionists  concerning  these  so-called  adulterants.  The  free 
traders  maintained  that  it  was  the  tariff  system  which  caused 
them  to  be  resorted  to,  thus  depriving  the  people  of  all-wool 
fabrics;  while  the  protectionists  alleged  that  the  foreign  manu- 
facturers were  the  greatest  adepts  in  using  shoddy  and  that  the 
high  duties  served  to  keep  out  flimsy  and  worthless  stuff.  The 
obvious  truth  was  that  within  the  country  as  well  as  without  the 
pressure  for  using  any  available  substitute  for  the  expensive  wool 

almost  all  wool  actually  combed,  and  actually  used  in  the  worsted  manufacture, 
came  to  be  not  strict  "  combing  wool  "  as  denned  in  the  tariff,  but  cross-bred  wool 
classed  in  the  tariff  as  "  clothing  wool."  Nevertheless  some  millions  of  pounds  of 
strict  combing  wool  were  imported  each  year,  and  in  occasional  years  much  more; 
and  as  regards  this,  the  compensating  arrangement  never  could  pretend  to  be 
accurate.  —  Cf.  what  is  said  in  the  Tariff  Board  Report,  p.  89. 

1  Cf.  p.  388,  below. 

2  The  importance  of  these  substitutes  or  "  adulterants  "  is  shown  by  the  fact 
that  little  more  than  half  of  the  woolens  made  in  the  country  was  all  wool.     The 


330         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

was  enormous,  and  that  every  device  was  tried  in  order  to  manu- 
facture presentable  fabrics  from  the  cheapest  possible  material. 
Probably  the  tariff,  by  making  wool  even  dearer  than  it  had  to 
be  because  of  the  natural  conditions  that  operate  on  all  animal 
products,  drove  American  manufacturers  to  substitute  somewhat 
more  than  would  have  been  the  case  under  free  wool.  On  the 
other  hand,  the  very  limitations  which  the  wool  duty  caused  in 
the  choice  of  the  various  grades  may  have  prevented  the  domestic 
makers  of  woolens  from  securing  as  good  results  as  their  foreign 
rivals  from  the  deft  mixture  of  coarse  fibres  with  fine.  But  the 
influence  of  the  protective  system  in  these  directions  was  much 
exaggerated  by  both  sides.  ( 

So  far  as  concerns  the  compensating  system,  however,  the 
consequences  from  the  use  of  substitutes  were  great.  Obviously, 
to  the  extent  they  were  resorted  to,  four  pounds  of  wool  were  not 
required  in  order  to  make  one  pound  of  cloth;  and  the  compen- 
sating duty  based  on  that  assumption,  liberal  even  in  the  case  of 
most  all-wool  goods,  was  grossly  excessive  on  that  large  portion 
of  the  domestic  output  for  which  there  was  use  of  shoddy,  noils, 
carpet  wool,  or  cotton.  A  niggardly  allowance  for  this  obvious 
defect  in  the  system  was  made  in  the  tariff  acts  passed  subsequent 

Tariff  Board  gave  the  following  figures,  based  on  census  returns  (Report,  pp.  220, 
224,  226,  230):  — 

Worsteds:  1900  191° 

Value  of  total  goods    $120.3  mill.  $312.6  mill. 

"       "  all-wool  goods 60. s    "  160.9    " 

Woolens: 

Value  of  total  goods    118.4    "  107. 1    " 

"       "  all-wool  goods 57-3    "  60.0    * 

The  quantity  of  the  various  materials  used  in  the  woolen  branch  in  1909  was:  — ■ 

Wool  (in  scoured  condition) 60  t 

"     (yarn)    8 

—  68  mill.  lbs. 

Camel,  alpaca,  and  other  hair 18  C 

Shoddy  made  from  rags  in  the  mill 31 

Shoddy  purchased 20 

Noils  and  waste 24 

Cotton  (including  cotton  yarn) 33 

—  126  mill.  lbs. 

I  have  condensed  these  figures  from  the  Board's  Report,  p.  228.  Between  1900 
and  1910  there  was  a  marked  increase  in  proportion  of  substitutes  used;  one 
among  the  indications  that  the  woolen  branch  of  the  industry  was  in  a  transitional 
and  perhaps  precarious  state. 


WOOLENS  AND  WORSTEDS  33  I 

to  1867;  woolen  goods  were  graded  after  1883  according  to  the 
value,  and  those  having  the  lowest  value  were  subjected  to  com- 
pensating duties  based  on  a  proportion  of  three  to  one  instead  of 
four  to  one.  But  the  allowance  was  quite  insufficient;  the  com- 
pensating duty  remained  much  higher  than  would  have  sufficed 
for  its  avowed  purpose.1 

The  consequence,  to  repeat,  was  that  the  whole  system  got 
out  of  gear  within  a  few  years  after  its  adoption  in  1867.  At  an 
early  date  it  was  easily  seen  that  the  apparent  simplicity  and 
frankness  of  schedule  K  covered  a  vast  amount  of  complexity 
and  pretense.2  In  its  actual  working  the  system  was  intricate, 
not  simple;  the  compensating  duties  did  not  merely  compensate, 
they  added  very  much  to  the  manufacturers'  protection.  Dur- 
ing the  short  period  of  free  wool  from  1894  to  1897  this  fact  was 
brought  home  to  the  manufacturers,  and  then  was  freely  ad- 
mitted.3 After  1897,  when  protectionism  revived  in  full  force, 
and  the  good  old  times  seemed  to  have  returned  without  pros- 
pect of  relapses  to  tariff  reduction,  the  system  in  all  its  details 
was  again  accepted  as  part  of  the  unalterable  order  of  things. 
But  in  1909,  in  the  debates  on  the  tariff  act  of  that  year,  it  was 
again  sharply  attacked.  The  unwillingness  of  the  manufacturers 
to  consider  the  slightest  modification  (it  will  be  remembered  that 
in  the  tariff  of  1909  Schedule  K  was  left  quite  intact)  added  to 
the  bitterness  of  the  critics.  The  most  important  investigation 
by  the  Tariff  Board  was  on  this  schedule;  and  the  conclusions 
stated  in  its  Report  laid  bare  the  anomalies  of  the  compensating 
system  in  a  way  to  leave  it  quite  indefensible.     The  Board  un- 

1  See  the  tabular  statement  on  p.  325.     Cf.  the  Tariff  Board  Report,  p.  124. 

2  I  said  as  much  in  an  essay  published  in  1885;  reprinted  in  my  Tariff  History 
(pp.  208  seq.). 

3  In  the  spring  of  1894,  when  the  tariff  bill  of  that  year  was  being  debated  and 
the  abolition  of  the  compensating  system  was  impending,  the  A  merican  Cotton  atid 
Wool  Reporter  wrote  (May  24,  1894):  "The  specific  duty  under  existing  law  is 
more  than  compensatory.  It  furnishes  a  large  measure  of  protection,  and  in  fact 
is  the  substance  of  the  protection  on  medium  and  low-grade  goods.  .  .  .  The 
proper  thing  to  do  now  for  the  manufacturers  is  to  confess  to  a  little  deception 
regarding  the  make-up  of  the  specific  duty,  admit  the  truth,  and  ask  for  recogni- 
tion of  the  actual  facts.  The  protection  was  needed,  and  the  only  sin  committed 
was  in  the  way  it  was  obtained." 


332        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

equivocally  concluded  that  "  the  specific  duty  is  more  than  com- 
pensatory for  manufacturers  using  wools  of  lighter  shrinkage  "; 
and  in  the  more  detailed  portions  of  the  Report  the  excesses  were 
made  clear  beyond  a  shadow  of  doubt.1 

The  further  course  of  events  need  not  here  be  recounted  in 
detail.  The  free  admission  of  wool  in  the  tariff  act  of  1913  neces- 
sarily brought  with  it  the  complete  abolition  of  the  system.  All 
the  specific  duties  on  woolen  manufactures  were  swept  away; 
there  was  no  longer  occasion  or  excuse  for  compensation.  Not 
only  this;  the  ad  valorem  or  protective  duty  was  much  reduced. 
From  a  range  of  50  and  55  per  cent  it  went  down  to  35  per  cent. 
This  simple  duty  of  35  per  cent  replaced  the  previous  elaborate 
compound  duties,  bringing  not  only  a  marked  reduction  in  the 
nominal  protection,  but  a  much  greater  reduction  in  the  really 
effective  protection.  A  new  chapter  was  opened  in  the  history 
of  protection  and  probably  in  the  history  of  the  woolen  industry 
itself. 

The  outstanding  fact  in  all  this  tortuous  development  is  that 
for  a  long  period  the  duties  on  most  woolens  were  not  only  high, 
but  high  to  the  point  of  prohibition.  So  far  as  the  range  of 
duties  goes,  the  case  is  similar  to  that  of  cottons ;  in  both  instances 
prohibition  on  most  classes  of  goods.  There  is  similarity,  too, 
in  that  the  extreme  height  of  the  duties  was  in  neither  case  really 
designed  by  the  legislators.  Those  on  cottons  became  unde- 
signedly high  because  left  so  long  at  the  figures  fixed  when  the 
civil  war  caused  the  great  rise  in  the  price  of  raw  cotton;  those 
on  woolens  became  high  because  of  the  unforeseen  working  of 
the  compensating  system.  Were  the  consequences  or  concomi- 
tants of  extreme  protection  similar  for  the  two  industries  ?  The 
answer  to  this  question  calls  for  an  examination  of  the  history 
and  characteristics  of  the  woolen  manufacture. 

1  See  the  Summary,  p.  13;  and  such  a  concise  statement  as  this  (p.  125):  "  If 
all  wools  lost  75  per  cent  from  greasy  wool  to  cloth,  this  four-to-one  ratio  would  be 
perfect  as  a  basis  for  compensation,  but  only  in  making  the  best  fabrics  from 
heavy-shrinking  wools  is  so  much  compensation  necessary.  Cotton-mixed  woolens, 
cotton  warp  worsteds,  in  fact  the  majority  of  woolen  and  worsted  fabrics  made  in 
the  United  States  do  not  require  compensation  equal  to  four  times  the  duty  on 
class  I  wool." 


WOOLENS  AND  WORSTEDS  333 

The  growth  of  the  two  main  branches  of  the  industry  — 
woolens  and  worsteds  —  is  shown  by  the  appended  tabular  state- 
ment.1 As  regards  the  relation  between  domestic  production  and 
volume  of  imports,  the  figures  tell  a  tale  essentially  the  same  as 
for  cottons  and  silks.  The  value  of  the  domestic  product  enor- 
mously increased  during  the  half-century;  that  of  the  imports  at 
no  time  showed  a  substantial  increase  and  in  the  later  years  an 
unmistakable  decline.  The  imports  have  been  a  steadily  dimin- 
ishing quota  in  the  total  supply,  and  in  recent  times  an  almost 
negligible  fraction.  Only  certain  selected  grades  have  continued 
to  be  procured  from  foreign  countries  —  a  few  specialties  and 
certain  sorts  of  fine  fabrics.  Even  for  these,  it  may  be  remarked, 
the  domestic  manufacturers  have  been  supplanting  their  foreign 
rivals  more  and  more.  Concerning  the  imports  which  still  come 
in  and  their  significance,  more  will  be  said  later.  It  suffices  for 
the  present  to  point  out  that,  if  the  test  of  success  in  a  protec- 
tionist policy  be  the  mere  substitution  of  domestic  products  for 
foreign,  almost  complete  success  in  this  case  also  has  been 
achieved. 

Looking  at  the  figures  for  domestic  production  more  closely,  it 
will  be  seen  that  a  marked  change  took  place  in  the  relation 


1 

Value  of  Domestic  Product 

(Millions  of  Dollars) 

A 

Woolens 

Worsteds 

Total 

Woolens 

and  Worsteds 

Total,  all 

Manufactures 

of  Wool 

Imports  of 
Manufactures 
of  Wool 

i860 

$61.9 

$3-7 

$65.6 

$73-4 

$43-1 

1870 

155-4 

22.1 

177-5 

199-3 

34-5 

1880 

160.6 

33-5 

194.1 

238.1 

33-9 

1890 

133-6 

79.2 

212.8 

270.5 

56.6 

1900 

118.4 

120.3 

238.7 

297.0 

16.2 

WS 

142.2 

165-7 

3°7-9 

381.0 

17.9 

1910 

107. 1 

312.6 

419.7 

507.2 

23.0 

The  figures  of  domestic  product  in  the  fourth  column  are  for  all  the  manufac- 
tures of  wool,  including  carpets,  blankets  and  flannels,  and  some  minor  branches, 
as  well  as  the  two  leading  ones.  With  these  figures  (in  column  four)  the  imports 
should  be  compared,  since  the  figures  are  for  all  the  imports,  not  those  of  worsted 
and  woolens  alone.  Both  in  the  domestic  product  and  in  the  imports  the  woolens 
and  worsteds  dominate.  —  The  figures  are  derived  from  the  Census  Bulletin  of 
1910  on  the  Woolen  Manufacture;  see  also  the  Report  of  the  Tariff  Board,  pp.  220, 
226. 


334         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

between  the  two  branches.  Woolens  lost  ground,  absolutely 
and  still  more  relatively.  Worsteds,  comparatively  insignificant 
in  i860,  increased  with  extraordinary  rapidity,  and  came  to  be 
by  far  the  most  important  part  of  the  manufacture  as  a  whole. 
In  the  older  branch  an  extraordinary  and  abnormal  growth  took 
place  between  i860  and  1870,  in  consequence  of  the  exceptional 
demand  during  the  civil  war  period;  and  the  unusual  figure  of 
product  which  was  reached  in  1870  was  still  maintained  in  1880. 
But  since  the  latter  year,  the  output  of  woolens  has  declined, 
while  that  of  worsteds  has  mounted  without  interruption. 

No  doubt  the  stated  figures  of  value  of  product  somewhat 
exaggerate  the  extent  of  the  growth  in  the  worsted  branch.     As 
in  other  cases,  allowance  must  be  made  for  the  increase  of  speciali- 
zation.    A  tendency  in  this  direction  appeared  more  especially  in 
the  worsted  branch.     It  has  become  more  common  than  in  former 
times  for  a  worsted  mill  to  buy  material  in  partly-manufactured 
state,  —  as  tops  or  as  yarn.     Then  the  yarn  (say)  appears  in  the 
census  reports  as  product  for  the  spinning  mill,  and  presently 
appears  again  in  the  value  of  the  cloth  turned  out  by  the  weaving 
mill.     A  curious  and  unexpected  stimulus  to  specialization  was 
given  by  the  tariff  act  of  1883,  which  admitted  some  yarns  (by  a 
miscalculation  on  the  part  of  those  who  adjusted  the  details  in  the 
duties)  at  low  rates  and  tempted  domestic  mills  to  buy  imported 
yarns;  the  practice,  once  begun,  was  continued  to  a  large  extent 
even  after  later  tariff  acts  raised  the  yarn  duties  and  caused  the 
weaving  establishments  to  turn  to  domestic  spinners.      These 
questions  of  organization,  important  and  interesting  as  they  are, 
lie  in  the  main  outside  the  scope  of  the  present  inquiry.     The 
extent  to  which  they  must  be  borne  in  mind  when  referring  to 
the  census  figures  of  "  value  of  product  "  is  indicated  by  other 
supplementary  figures,  such  as  those  for  numbers  of  persons  em- 
ployed, machines,  and  the  like.      A  glance  at  such  corrective 
data,  given  in  the  note,  shows  that  they  lead  to  no  great  modifi- 
cation of  the  general  conclusions.     It  still  appears  not  only  that 
the  domestic  industry  in  general  has  grown  greatly,  but  that  the 
woolen  branch  has  sensibly  declined. 


WOOLENS  AND  WORSTEDS  335 

For  this  great  shift  two  explanations  have  been  offered.  That 
which  is  doubtless  most  in  accord  with  the  facts  ascribes  it  to 
general  industrial  causes,  —  changes  both  in  the  demand  for 
goods  and  in  the  methods  of  production.1  The  other  ascribes  it, 
at  least  in  large  part,  to  the  tariff  system,  and  more  particularly 
to  the  way  in  which  the  duties  on  wool  and  woolens  were  adjusted. 
Attention  may  first  be  given  to  the  latter  explanation,  since  it  is 
closely  connected  with  what  has  just  been  said  of  the  compensa- 
ting system. 

The  mode  in  which  the  duty  was  levied  evidently  led  the 
American  manufacturers  to  refrain  from  buying  foreign  wools 
whose  shrinkage  was  high  and  whose  scoured  content  was  low. 
It  proved  to  be  prohibitory  on  wools  whose  shrinkage  was  very 
high;  these  could  not  be  profitably  imported  at  all.  Now,  as 
has  been  pointed  out,  the  short  fibre  wools  of  the  merino  type 
shrink  most,  and  are  the  wools  used  by  the  makers  of  carded 
goods,  or  woolens.  These  manufacturers  were  virtually  pro- 
hibited from  using  some  grades  of  foreign  wool  suitable  for  their 
branch  of  the  industry. 

Not  only  this:  but  the  compensating  system  in  their  case 
did  no  more  than  compensate  on  the  all-wool  fabrics,  nay,  on 
some  grades  did  not  suffice  for  compensation;  whereas  on 
worsteds  it  quite  overshot  the  mark  and  gave  an  additional  con- 
cealed protection.  The  cross-bred  wools,  still  more  the  combing 
wools,  used  in  the  making  of  worsteds,  yielded  a  larger  proportion 
of  scoured  wool  than  was  assumed  by  the  four-to-one  ratio,  and 
the  compensating  duties  based  on  this  ratio  were  quite  exces- 
sive.    The  real  protection  to  the  manufacturers  of  worsteds  was 

1  The  best  unit  of  productive  capacity  is,  for  woolens,  the  set  of  cards;  for 
worsteds,  the  combing  machine.      Between  1900  and  1910  the  numbers  of  these 

were  reported  as  follows:  — 

Sets  of  Cards  in      Combing  Machines 
Woolen  Mfg.  in  Worsted  Mfg. 

1900 6>4o8  I.3I7 

igos 5,753  I.440 

IOio 5.079  1.978 

The  data  confirm  the  conclusion  that  the  woolen  branch  was  virtually  station- 
ary till  about  1900,  and  thereafter  declined;  while  the  worsted  branch  grew  rapidly 
and  continuously. 


336        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

much  greater  than  to  the  manufacturers  of  the  carded  woolen 
goods.1 

All  this  is  true;  but  it  does  not  go  far  toward  explaining  the 
differences  in  the  development  of  the  two  branches.  Beyond 
question  the  duty  on  wool,  difficult  enough  to  defend  in  any  case, 
was  made  the  more  indefensible  because  of  the  way  in  which  it 
was  levied.  Beyond  question,  too,  the  compensating  system 
favored  the  manufacturers  of  worsteds  more  than  those  of  woolens. 
But  the  long-continued  trend  toward  worsteds  cannot  be  ascribed 
to  these  causes  alone  or  to  these  chiefly.  True,  it  is  probable  that 
during  the  first  decade  or  two  after  1867  the  excessive  duties  on 
worsteds  contributed  to  rapid  growth  in  this  branch.  It  is 
always  during  the  period  just  after  the  establishment  of  pro- 
tection that  it  most  serves  to  give  high  profits  to  the  domestic 
producers  and  most  stimulates  the  growth  of  the  domestic  in- 
dustry. As  time  goes  on,  however,  competition  sets  in  and 
unusual  profits  disappear  (barring  of  course  the  case  of  monop- 
oly, which  is  not  found  in  this  instance).  The  notion  that  a 
particularly  high  duty  continues  to  bring  particularly  high  profits 
to  the  protected  producers  really  rests  on  the  other  notion  that 
the  tariff  necessarily  causes  a  rise  in  domestic  price  by  the  full 
amount  of  the  duty  imposed.  But  where  the  rate  is  amply  high 
enough  to  keep  out  the  foreign  rivals,  it  matters  little  whether 
it  be  50  or  150  per  cent.  The  domestic  price  is  then  determined, 
under  competitive  conditions,  solely  by  the  domestic  conditions 
of  supply  and  cost.  As  regards  woolens  and  worsteds,  though 
the  duties  on  the  latter  were  particularly  high,  the  duties  on 
woolens  were  quite  high  enough.  On  them  also  there  was  not 
a  little  concealed  protection  in  the  compensating  system;    on 

1  The  National  Association  of  Wool  Manufacturers,  the  compact  and  influential 
organization  which  represented  the  industry  before  Congress  and  the  public,  was 
dominated  for  many  years  by  the  worsted  makers.  This  was  natural,  not  only 
because  of  the  size  and  rapid  growth  of  their  branch,  but  because  the  individual 
enterprises  in  it  were  on  a  larger  scale,  and  were  conducted  by  the  more  ambitious 
and  dominating  personalities.  During  the  period  of  general  tariff  revolt  which 
followed  the  act  of  1909,  the  manufacturers  of  carded  woolens  formed  an  inde- 
pendent organization  of  their  own,  protesting  against  the  favored  treatment  given 
to  their  rivals  by  the  wool  duty  and  the  compensating  system.  See  the  Statement 
of  the  Carded  Wool  Manufacturers. 


WOOLENS  AND  WORSTEDS  337 

them  also  the  rates  in  general  were  prohibitory.  Exception  must 
doubtless  be  made  for  certain  classes  of  woolen  goods,  particu- 
larly for  all-wool  fabrics  made  from  fine  merino  wool  of  heavy 
shrinkage.  On  these  the  compensating  duty  achieved  no  more 
than  its  avowed  purpose,  sometimes  failed  to  achieve  it  fully. 
Neither  was  the  net  protection  here  pushed  to  the  point  of  pro- 
hibition; some  imports  continued.  But  the  great  bulk  of  the 
domestic  manufacture  of  carded  woolens  was  devoted  through- 
out not  to  these  finer  goods  but  to  cheaper  grades,  on  which 
the  duties  were  as  prohibitory  as  they  were  on  most  grades  of 
the  rival  worsteds.  If  under  the  circumstances  the  older  branch 
of  the  manufacture  was  surpassed  by  its  younger  rival,  the 
explanation  must  be  sought  elsewhere  than  in  the  peculiarities  of 
the  tariff  system. 

This  conclusion  is  confirmed  by  the  fact  that  the  same  general 
trend  appeared  in  other  countries.  In  free  trade  England,  in 
protectionist  Germany  and  France,  the  worsted  branch  also 
gained  on  its  rival.  Promoted  and  hastened  though  the  change 
may  have  been  in  the  United  States  by  our  tariff,  it  rested  on 
causes  of  wider  operation. 

Among  these  causes,  the  vagaries  of  fashion  played  a  large 
part,  and  indeed  are  often  declared  to  have  played  the  leading 
part.  Next  to  the  silk  manufacture,  that  of  woolens  is  most 
affected,  among  textiles,  by  this  psychological  element.  In  the 
last  quarter  of  the  nineteenth  century  fashion  turned  largely  from 
the  close-matted  comparatively  heavy  woolens  to  the  less  com- 
pacted, lighter,  smoother  worsteds;  and  the  direction  of  produc- 
tion necessarily  followed  the  course  of  demand.1 

More  important,  however,  and  fundamental  after  all,  were 
changes  in  the  technique  of  production.  These  favored  the 
worsted  branch  both  by  giving  it  wider  scope  and  by  enabling 
it  to  attain  in  greater  degree  the  advantages  of  the  machine 
processes,  —  homogeneity  of  material  and  product,  standardiza- 
tion, large-scale  operation.  The  changes  center  about  the  in- 
vention and  improvement  of  the  combing  machine,  from  which 

1  See  the  Tariff  Board  Report,  p.  85;  cf.  Clapham,  The  Woolen  and  Worsted 
Industries,  pp.  9,  142. 


338         SOME  ASPECTS  OF  THE   TARIFF  QUESTION 

have  flown  industrial  consequences  so  great  as  to  entitle  this 
to  be  reckoned  among  the  revolutionary  changes  in  the  textile 
arts.  Moreover,  they  have  an  important  bearing  on  our  tariff 
problems,  and  therefore  deserve  to  be  considered  more  fully 
than  would  otherwise  be  pertinent  to  the  present  inquiry. 

Reverting  for  a  moment  to  the  difference  between  woolens  and 
worsteds,  let  it  be  recalled  that  in  general  woolens  are  made 
with  short  staple  wool,  worsteds  with  long  staple  wool.  Woolens 
are  carded  goods;  that  is,  the  fibres  of  the  wool  are  pulled  apart 
and  interlaced  by  the  card,  —  strips  of  leather  armed  with  pro- 
truding short  teeth.  The  old  hand  card  was  succeeded  at  a 
comparatively  early  period  in  textile  development  by  the  machine 
card,  in  which  the  teeth  are  set  on  cylinders  that  revolve  at 
different  speeds.  In  carding,  whether  of  wool  or  cotton  or  silk, 
the  aim  is  to  secure  a  sheet  of  smoothed,  interlacing  fibres,  ready 
for  the  subsequent  operation  of  spinning.  The  comb  also  pre- 
pares the  fibre  for  spinning,  but  in  a  different  way  and  with  a 
somewhat  different  object.  It  selects  the  longer  fibres,  pulls 
these  out,  and  arranges  them  parallel  to  each  other,  rejecting  the 
short  fibres.  The  selected  long  fibres,  laid  together  in  a  soft, 
loose,  rope-like  strand,  are  called  tops;  the  rejected  short  fibres 
are  called  noils.  These  noils,  it  may  be  noted,  are  used  in  the 
other,  rival  branch;  they  are  short  fibres,  such  as  the  carded  in- 
dustry primarily  uses;  they  are  a  natural  substitute,  or  comple- 
mentary material,  by  no  means  an  adulterant,  serviceable  in 
making  the  woolen  goods  proper. 

The  machine  processes  were  applied  to  combing,  at  a  date  com- 
paratively recent.  The  comb  remained  a  hand  tool  longer  than 
the  card.  Indeed,  the  hand  card,  being  simple,  and  managed 
with  comparative  ease,  never  became  the  tool  of  a  separate  trade. 
The  comb  required  specialized  skill;  the  wool  combers  formed  a 
craft,  and  were  important  figures  in  the  early  history  of  the 
worsted  manufacture.  Like  the  hand  loom  weavers,  they  did 
not  give  way  to  the  machine  until  the  middle  of  the  nineteenth 
century.  The  fact  that  machinery  triumphed  so  much  later 
than  in  carding  is  in  itself  an  indication  of  greater  complexity  in 
the  operation,  and  so  an  explanation  of  the  unusual  intricacy  of 


WOOLENS  AND  WORSTEDS  339 

the  modern  combing  machine.  That  machine,  or  the  "  comb," 
as  it  is  now  commonly  called,  was  developed  by  a  series  of  in- 
ventors about  1850  and  thereafter,  exhibiting  in  its  course  the 
characteristic  features  that  appear  in  the  history  of  most  modern 
inventions.  There  was  a  preparatory  period  of  tentative  grop- 
ing, and  then  an  almost  simultaneous  perfecting  of  the  main 
processes  by  several  hands;  while  business  shrewdness  and  enter- 
prise were  necessary  to  bring  to  full  fruition  the  work  of  mechani- 
cal genius.  The  main  seat  of  the  industry  and  of  the  changes  in 
it  was  Bradford  in  Yorkshire.  As  England  was  the  habitat  of 
the  long-wool  combing  breed  of  sheep,  so  it  was  in  England  that 
the  worsted  manufacture  began  and  continued.  Bradford  was 
and  is  still  the  most  important  worsted  center  in  the  world.1 

The  combing  machine  greatly  changed  the  worsted  industry 
in  two  respects.  In  the  first  place,  it  served  to  standardize  the 
conditions  of  manufacture  and  so  to  stimulate  a  tendency  to 
large-scale  operation.  The  tops  turned  out  by  the  comb  are  a 
homogeneous  material;  so  much  so  that  they  have  been  syste- 
matically dealt  with  on  exchanges,  and  are  often  the  occasion 
of  contracts  for  future  delivery.  They  are  commonly  made  in 
Europe  by  separate  top-makers,  who  sell  to  the  spinners.  Here, 
as  with  other  processes,  specialization  in  the  textile  industries 
is  much  more  marked  in  Europe  than  in  the  United  States.  The 
very  possession  of  a  homogeneous  material  facilitates  the  use  of 
highly-perfected  and  quasi-automatic  machinery  in  the  later 
manufacturing  stages.  In  all  countries  the  worsted  branch  of 
the  industry  is  conducted  on  a  larger  scale  than  the  woolen 
branch;  it  is  more  capitalistic,  more  in  line  with  the  general 
trend  of  modern  industry.     Thus  in  England,  there  were  in  1899 

1  See  the  excellent  account  of  the  inventions  in  Burnley,  History  of  Wool  and 
Wool-combing.  Cf .  what  is  said  by  Clapham,  The  Woolen  and  Worsted  Industries, 
p.  136.  Among  the  conspicuous  inventors  were  Donisthorpe,  Lister,  Holden, 
Heilmann,  and  Noble,  —  all  English,  with  the  exception  of  Heilmann  (an  Alsatian). 
The  start  was  made  by  the  versatile  and  indefatigable  Cartwright  as  early  as  1790; 
but  it  was  not  until  half  a  century  later  that  machines  constructed  on  his  principle 
were  brought  to  working  efficiency.  At  still  later  dates  various  minor  improve- 
ments were  added.  Lister  (Lord  Masham)  played  in  the  main  the  role  of  the  business 
man,  appreciating  and  guiding  the  inventors,  and  profiting  handsomely.  The 
whole  episode  is  typical  of  the  course  of  mechanical  progress  in  modern  times. 


34-0        SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

about  eighty  persons  employed  in  the  average  woolen  mill,  but 
as  many  as  two  hundred  in  the  average  worsted  mill.1  In  the 
United  States,  the  worsted  mills  turned  out  on  the  average  (in 
1909)  a  product  more  than  four  times  as  great  per  establishment 
as  the  woolen  mills.2  This  contrast  is  the  more  striking  because 
in  both  countries  specialization  has  gone  further  in  worsteds  than 
in  woolens.  The  typical  worsted  mill  confines  itself  to  a  less 
number  of  manufacturing  operations,  and  yet  is  larger  in  size 
than  the  woolen  mill  whose  operations  are  split  up  into  a  greater 
number.3  The  worsted  offers  greater  opportunities  for  the 
economies  of  large-scale  production,  and  grows  at  the  expense  of 
the  branch  which  offers  less  opportunities  in  this  direction. 

Quite  a  different  consequence  of  the  combing  machine  was  an 
extension  of  the  range  of  the  industry,  both  as  regards  the  quality 
of  the  wools  which  could  be  used  and  the  quality  of  the  fabrics 
which  could  be  turned  out.  The  hand  comb  had  been  available 
only  for  wool  which  is  combing  wool  strictly,  —  the  long  staple 
wool  of  English  sheep.  The  same  was  the  case  with  the  comb- 
ing machine  when  first  put  into  use.  But  gradual  improve- 
ment made  the  machine  applicable  to  wools  having  fibres  not  so 
long.  Cross-bred  wools  could  be  put  through  it,  their  shorter 
fibres  eliminated  as  noils,  their  longer  fibres  laid  together  as  tops. 
It  is  for  this  reason  that  the  classification  of  wool  so  long  main- 
tained in  our  tariffs,  —  "  clothing  "  wool  in  class  I,  "  combing  " 
wool  in  class  II,  —  became  quite  out  of  accord  with  the  industrial 
facts.  Merino  wool  proper  is  still  too  short  to  be  used  in  the 
worsted  manufacture.      But  a  large  part,  probably  the  larger 

1  Clapham,  p.  131. 

2  The  Tar  if  Board  Report  gives  the  following  figures  (p.  220):  — 

Average  Value  of  Product 

i8gg  1909 

Worsteds $647,000  $965,000 

Woolens 114,000  182,000 

The  increase  in  the  average  output  in  woolen  mills  between  1899  and  1909  is 
ascribed  to  the  disappearance  of  a  large  number  of  small  country  mills. 

3  Clapham,  pp.  134  seq.:  "  The  commonest  type  of  woolen  mill  .  .  .  combines 
all  processes,  from  opening  the  new  wool  to  dyeing,  —  when  it  is  piece-dyed,  —  and 
finishing  the  cloth."  So  the  Tariff  Board  reports  (p.  220)  that  "  in  the  woolen 
industry  the  typical  mill  combines  all  processes  from  raw  wool  to  finished  cloth." 


WOOLENS  AND  WORSTEDS  34 1 

part,  of  the  wool  which  the  tariff  classed  as  clothing  wool  was  in 
fact  put  through  the  combs.  The  worsted  industry  thus  had 
at  its  disposal  a  very  great  and  varied  mass  of  raw  material,  and 
was  able  to  turn  out  goods  resembling  closely  those  of  the  other 
branch.  The  typical  worsteds  of  former  days  were  smooth  and 
lustrous,  somewhat  harsh  in  quality.  With  the  improvement  in 
the  combing  machine  softer  and  suppler  goods  could  be  made, 
having  some  of  the  excellences  of  both  kinds.  The  two  in  fact 
came  to  overlap,  and  the  worsted  industry  was  able  to  turn  out 
fabrics  of  much  greater  variety  than  in  former  times. 

All  these  factors  were  in  operation  in  the  United  States,  and 
some  of  them  to  an  exceptional  degree.  The  worsted  industry 
was  equipped  with  machinery  at  once  perfected  and  expensive, 
and  its  material  was  standardized;  so  it  secured  the  technological 
basis  for  large-scale  operations.  A  wide  range  of  raw  material 
was  brought  to  its  disposal.  The  changes  in  fashion  were 
toward  its  products.  In  the  United  States  an  additional  factor 
probably  was  that  the  lighter  and  looser  worsteds  were  better 
adapted  to  climate  and  habit,  —  a  warm  summer  and  in  winter 
houses  amply  heated.  No  doubt  during  the  earlier  stages  the 
extreme  protection  which  was  extended  to  worsteds  under  the 
compensating  system  gave  a  special  impetus,  and  caused  some 
manufacturers  to  reap  unusually  large  profits.  But  the  con- 
tinued growth  and  eventual  predominance  of  this  branch  indi- 
cate that,  even  though  stimulated  by  the  tariff  and  perhaps 
steadily  dependent  on  the  tariff  for  existence,  the  protective 
system  alone  could  not  account  for  its  position  relatively  to  the 
other  branch. 


CHAPTER  XXI 

THE  WOOLEN  MANUFACTURE  {continued). 
CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY 

Having  surveyed  the  growth  of  the  two  great  branches  of 
the  American  wool  manufacture,  we  are  prepared  to  consider  the 
more  difficult  problems  concerning  the  effects  of  protection:  the 
technical  development  of  the  industry  in  this  country  and  in 
Europe,  the  effectiveness  of  the  labor  and  capital  engaged,  the 
prospect  of  attaining  independence  of  tariff  support.  Was  the 
growth  similar  to  that  in  other  textile  industries  ?  As  regards 
cottons,  we  have  seen  that  extremely  high  duties  can  be  fairly 
said  to  have  been  almost  without  effect  either  for  good  or  evil: 
they  did  not  check  industrial  progress,  nor  did  they  serve  to 
promote  it.  The  history  of  the  silk  manufacture  suggests,  even 
if  it  does  not  quite  prove,  that  a  newly-established  industry  may 
not  only  grow  in  size  under  the  influence  of  protection,  but 
advance  in  effectiveness.  What  does  the  evidence  indicate  in 
the  case  of  woolens  ? 

The  preceding  account  of  the  history  and  characteristics  of  the 
worsted  and  woolen  branches  would  lead  one  to  surmise  that  the 
first  named,  young  though  it  is,  would  have  proved  more  likely 
to  give  scope  to  the  special  industrial  excellences  of  our  inventors 
and  business  leaders,  and  more  promising  as  regards  eventual 
independence.  The  woolen  branch,  on  the  other  hand,  seems  to 
have  characteristics  that  indicate  less  adaptability  to  American 
conditions,  a  field  less  favorable  for  American  enterprise.  Yet 
it  is  not  clear  that  distinctions  or  conclusions  of  this  sort  can  be 
maintained.  The  course  of  development  in  both  branches  has 
been  different  from  that  in  the  other  textile  industries;  the  situa- 
tion in  many  respects  is  puzzling. 

First,  as  regards  worsteds.  Here,  to  repeat,  the  opportunities 
for  American  industrial  talent  seem  promising.  Yet  it  appears 
that  in  precisely  the  direction  where  one  looks  for  advance  by 

342 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY     343 

Americans,  —  the  invention  of  new  machinery  or  improvement 
of  old,  —  the  worsted  manufacture  showed  least  indication  of 
progress  or  of  independence.  On  the  contrary,  it  seems  to  have 
remained  under  European  tutelage,  content  to  import  and  to 
use  European  machinery.  This  at  all  events  was  the  case  in 
those  departments  of  the  industry  which  are  most  distinctive,  — 
combing  and  the  operations  closely  connected  with  combing. 
The  facts  brought  out  by  the  Tariff  Board  in  191 2  were  surprising. 
It  appeared  that  in  the  worsted  mills  hardly  any  machinery,  in 
all  the  processes  up  to  and  including  spinning,  was  of  domestic 
make.  Almost  all  the  combing  machines  were  imported,  almost 
all  the  drawing  frames  (these  begin  the  manipulation  of  the  tops 
as  delivered  from  the  combs,  reducing  the  tops  to  a  thin  sliver 
ready  for  spinning),  almost  all  the  frame  spinning  machinery, 
and  absolutely  all  of  the  mule  spindles.  Such  small  fraction  of 
the  combing  and  spinning  machinery  as  was  of  American  make 
was  a  direct  copy  of  that  imported.  Leadership  in  the  industry 
was  clearly  on  the  other  side  of  the  water.1 

Nor  did  it  appear  that  there  was  anything  in  the  organization 
of  the  working  force  or  in  the  efficiency  of  the  individual  opera- 
tives which  gave  any  advantage  to  Americans.  The  evidence 
on  this  topic,  taken  at  its  face,  pointed  to  but  one  conclusion. 
It  is  true  that  here,  as  elsewhere,  the  turn  taken  by  the  protective 
controversy  caused  the  manufacturers  to  lay  stress  on  their  own 
disabilities  or  failings.     The  notion  current  among  protectionists 

1  The  Tariff  Board  stated  in  its  Summary  (p.  16)  that  "  87  per  cent  of  all  the 

machinery  [in  worsted  mills],  from  the  scouring  of  the  raw  wool  through  to  the 

finished  yarn,  was  imported."     More  in  detail  (pp.  1026  seq.),  it  appeared  that 

of  the  Noble  combs  (English  system) 85%  were  imported 

"      French  combs  (Continental  systems) 100%     " 

"      Bradford  drawing  frames    90%     " 

"      French  drawing  frames 100%     " 

"      mule  spindles 100%     " 

"      frame  spindles 92%     " 

In  spinning  worsted  yarn,  both  mule  spindles  and  "  cap  "  spindles  are  used;  in 
spinning  woolen  yarn,  mules  alone.  "  Cap  "  spindles  are  in  principle  similar  to 
ring  spindles,  and  like  them  are  often  spoken  of  as  "  frame  spindles."  Ring 
spinning  proper  has  never  been  found  applicable  to  worsteds,  still  less  to  woolens. 
Cap  spindles  are  largely  used  in  England,  and  indeed  predominate  in  the  English 
worsted  manufacture;  whereas  the  mule  alone  is  used  in  the  French  worsted  in- 
dustry.    Cf.  Barker,  Textiles  (London,  iqio),  pp.  101,  in. 


344         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

for  many  years,  that  duties  should  be  so  levied  as  to  cover  higher 
cost  of  production  in  the  United  States,  led  their  spokesmen 
to  dilate  on  disadvantages  and  on  the  absence  of  any  factors 
making  for  advantage  or  special  effectiveness.  The  mill  opera- 
tives, it  was  said,  were  chiefly  of  foreign  birth,  and  not  of  the 
best  foreign  birth,  —  raw  agricultural  laborers  from  southern  and 
eastern  Europe,  suddenly  transplanted  to  factory  towns;  not 
equal  in  steadiness,  skill,  even  tractableness,  to  the  English,  Ger- 
man, and  French  who  remained  in  the  competing  mills  of  these 
several  countries.1  The  American  mills  were  said  to  have  the 
same  equipment;  the  operatives  performed  the  same  tasks  and 
performed  them  no  better,  nay,  not  so  well;  how  could  the  in- 
dustry possibly  maintain  itself,  paying  American  rates  of  wages, 
without  protection  ?  On  the  principles  of  protection,  the  argu- 
ment was  unanswerable ;  its  applicability  in  this  case  apparently 
was  beyond  cavil.  It  raised  unequivocally  the  fundamental 
questions  that  underlie  the  whole  controversy.  Is  it  worth  while 
to  support  industries  that  have  no  superiority  over  their  foreign 
competitors,  and  show  no  prospect  of  attaining  any  ?  If  all 
American  industries  were  in  the  same  state  as  the  worsted  manu- 
facture (in  the  departments  here  under  consideration) ,  —  if  all 
machinery  were  quite  the  same  as  in  Europe,  all  workmen  no 
more  efficient,  all  management  no  better,  —  could  the  product 
of  American  industry  be  larger,  and  could  wages  in  general  be 
higher  ?  Was  not  the  industry  one  in  which  the  effectiveness  of 
industry  failed  to  measure  up  to  the  general  American  standard 
of  effectiveness,  which  alone  makes  possible  a  high  general  rate 
of  wages  ? 

In  some  other  departments  of  the  manufacture  the  situation 
was  not  so  unpromising.  As  in  the  textile  industries  at  large, 
weaving  stood  in  a  position  apart.  Here  the  conditions  as  re- 
gards domestic  and  imported  machinery  were  quite  reversed. 
Only  one-fifth  of  the  looms  were  imported;  the  great  majority 
were  of  American  make.2  Not  only  this,  but  the  striking  Ameri- 
can improvements  in  weaving  had  been  found  applicable,  not 
indeed  throughout,  but  at  least  in  some  directions.     The  auto- 

1  Cf.  what  is  said  below,  p.  363,  note.  2  Tariff  Board  Report,  p.  1042. 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY     345 

matic  loom  was  used  in  weaving  certain  kinds  of  worsteds,  and 
cut  down  cost,  i.  e.,  increased  effectiveness,  in  this  part  of  the 
manufacturing  processes.  From  the  nature  of  the  case  it  could 
be  used  to  advantage  only  where  thousands  of  yards  of  a  single 
kind  of  fabric  were  turned  out;  such  as  "  blue  serges  "  and  the 
like  for  women's  wear,  having  a  cotton  warp,  comparatively  cheap 
and  sufficiently  serviceable,  —  goods  which  could  be  steadily 
marketed  in  great  quantities.1  Worsteds  and  woolens  are  in  gen- 
eral not  of  uniform  pattern  or  quality,  and  are  much  subject  to 
the  vagaries  of  fashion;  hence  mass  production  of  this  sort  is 
not  susceptible  of  the  same  extension  as  in  the  case  of  cottons. 
Indeed,  as  will  appear  presently,  there  are  peculiarities  in  woolen 
weaving  which  seem  to  militate  against  any  wide-spread  adop- 
tion of  the  methods  which  have  so  profoundly  affected  the  cotton 
manufacture.  The  apparently  exceptional  cases  in  which  the 
automatic  loom  was  used  in  weaving  worsteds  served  rather  to 
emphasize  the  contrast  between  them  and  the  more  typical  Am- 
erican conditions.  It  is  not  to  be  supposed  that  this  industry 
was  quite  outside  the  main  current,  and  quite  uninfluenced  by 
the  pervasive  tendency  in  the  United  States  to  extend  the  use  of 
labor-saving  devices.2     Yet  the  available  evidence  indicates  that, 

1  "  In  American  worsted  and  woolen  mills  the  weavers,  male  and  female,  operate 
one  or  two  looms  as  a  rule,  excepting  where  worsted  dress  goods  are  made  with 
cotton  warps.  Cotton  warp  being  stronger  than  woolen  or  worsted  makes  it 
possible  to  use  automatic  or  weft-replenishing  looms,  so  that  one  weaver  can  oper- 
ate as  many  as  twelve  looms  in  the  manufacture  of  worsted  dress  goods."  Tariff 
Board  Report,  p.  1045.  This  has  been  confirmed  to  me  by  conversations  with  the 
head  of  a  large  company  which  has  put  in  the  automatic  looms.  I  have  been  told, 
again  by  a  large  manufacturer,  that  the  automatic  loom  has  been  used  with  success 
for  all-wool  worsteds  also. 

2  Thus  the  Arlington  mills,  one  of  the  largest  and  most  conspicuous  of  the 
American  worsted  establishments,  has  erected  a  huge  and  highly  efficient  plant  for 
saving  the  grease  formerly  lost  in  the  process  of  scouring  wool  and  securing  thereby 
a  valuable  by-product.  The  same  thing  is  done  in  Germany,  where  wool  scouring 
with  utilization  of  grease  is  a  separate  specialized  industry.  In  accord  with  the 
American  tradition  this  is  done  in  the  Arlington  mills  as  part  of  great  integrated 
operations,  on  a  larger  scale  than  in  Germany,  and  probably  with  higher  efficiency. 
It  is  said  also  that  the  labor  force  necessary  for  spinning  and  for  tending  combs  has 
been  cut  down  in  this  establishment;  but  whether  in  greater  degree  than  in  foreign 
countries  does  not  appear.  See  a  small  advertising  pamphlet,  entitled  "  Tops," 
published  by  the  Arlington  mills  (1898),  pp.  56,  96.     The  Tariff  Board  con- 


346         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

as  regards  machinery,  the  advances  over  competing  foreigners 
were  less,  and  surprisingly  less,  than  in  other  textile  industries. 

It  is  possible  that  forward  strides  were  taken  in  other  direc- 
tions, —  in  the  more  general  economies  from  large-scale  opera- 
tion. In  the  worsted  manufacture,  as  elsewhere,  a  contest  has 
been  going  on  between  different  systems  of  organization  and 
management,  —  between  the  large  mill  and  the  very  large  mill, 
between  integration  and  specialization,  between  the  single  estab- 
lishment and  a  combination  embracing  many  establishments. 
In  these  respects  the  American  industry  shows  contrasts  both 
with  its  European  rivals  and  with  other  textile  industries  in  the 
United  States. 

In  the  mere  fact  of  a  comparatively  large  scale  of  production 
it  is  not  peculiar;  worsted  mills  in  Europe  also  are  larger  than 
woolen  mills,  and  as  large  as  cotton  and  silk  mills.  But  some  of 
the  American  mills  are  of  such  extraordinary  size  that  they  may 
be  called  giants;  they  endeavor  to  secure  the  advantages  of  large- 
scale  operations  on  a  scale  not  elsewhere  dreamed  of.  The  much- 
discussed  Wood  Mill,  erected  by  the  American  Woolen  Company 
at  Lawrence,  Mass.,  is  said  to  be  the  largest  textile  establishment 
under  a  single  roof  in  the  world.  Others,  such  as  the  Arlington 
mills  in  the  same  city,  are  of  similar  size;  there  is  a  well-known 
list  of  other  great  mills.  Side  by  side  with  them  are  a  number  of 
establishments  of  more  moderate  size,  comparable  with  the  typi- 
cal European  establishment.  It  is  not  certain  which  type  is 
gaining  in  the  United  States;  but  the  huge  concern  seems  at  the 
least  to  hold  its  own.  Its  methods  are  in  accord  with  those  of 
American  industrial  triumphs.  The  worsted  industry,  or  at 
least  some  branches  of  it,  may  be  thought  to  be  on  the  way  to 
securing  a  comparative  advantage. 

Possibilities  of  the  same  sort  may  be  considered  as  regards  the 
effects  of  integration  and  combination.  The  American  tendency 
on  the  whole  is  toward  integration.  Certain  it  is  that  specializa- 
tion is  carried  less  far  than  in  Europe,  in  the  worsted  industry 

eluded  that  the  cost  (in  money)  of  converting  wool  into  tops  was  nearly  twice  as 
great  in  the  United  States  as  in  England;  in  other  words,  found  no  indication 
of  special  effectiveness  in  the  United  States.     Report,  pp.  639  seq. 


i 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY     347 

itself  as  well  as  in  textile  industries  at  large.  In  some  respects 
there  are  signs  of  some  reaction  toward  specialization  in  the 
United  States;  the  trend  toward  integration  is  by  no  means 
without  exceptions;  but  there  is  nothing  like  the  division  of 
labor  between  distinct  branches,  —  scouring,  combing,  dyeing, 
spinning,  weaving,  finishing,  —  which  is  the  established  Euro- 
pean organization.1  It  remains  to  be  seen  in  this  matter  also 
whether  management  and  organization  after  the  American  plan 
will  hold  their  own,  or  whether  specialization  will  extend;  and 
further,  whether  the  great  integrated  establishment  will  prove  to 
have  advantages  not  only  over  its  specializing  competitors  at 
home,  but  over  its  competitors  of  the  same  character  abroad. 

So  it  is  with  regard  to  combination.  In  this  industry,  as  in 
others,  the  United  States  is  the  scene  of  a  bold  experiment  in 
great-scale  management.  The  American  Woolen  Company  is  a 
combination  of  a  number  of  mills  of  different  character,  united 
under  single  control,  and  endeavoring  to  secure  various  potential 
advantages.  Among  these  are  economy  in  the  purchase  and  allot- 
ment of  materials,  standardization  of  equipment,  and  specializa- 
tion among  the  several  establishments,  —  not  specialization  of  the 
kind  referred  to  in  the  preceding  paragraph,  but  in  the  sense  that 
each  mill  is  confined  to  one  class  of  goods,  operates  continuously 
on  its  specialty,  and  makes  no  endeavor  to  turn  out  a  "  line  "  of 
varied  products  such  as  the  independent  manufacturer  commonly 
thinks  it  necessary  to  offer.  All  sorts  of  mills  are  combined  in 
this  great  agglomeration;  not  only  worsted  mills,  but  woolen 
mills  in  the  narrower  sense  (carded  wool  mills) ;  scattered  more- 
over in  many  far-separated  places.  The  experiment  is  of  no 
little  interest  to  the  economist,  quite  apart  from  any  bearing  it 
may  have  on  the  tariff  question.  Does  this  method  of  organiza- 
tion really  conduce  to  effectiveness  in  production  ?  It  seems  to 
raise  no  question  of  monopoly.  However  important  and  even 
dominant  is  the  position  of  the  American  Woolen  Company,  it 
has  not  even  a  quasi-monopolistic  control  of  the  industry  or  of 
any  branch  of  it.     It  has  to  meet  competition  on  every  side;  the 

1  See  Clapham,  The  Woolen  and  Worsted  Industries;   and  Michaelis,  "  Die  Woll 
Industrie,"  in  Handbuch  der  Wirthschaftskunde  Deutschlands,  vol.  iii. 


348        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

contest  is  a  direct  uncomplicated  one  between  the  single  concern 
and  the  great  combination  of  similar  concerns.  The  traditional 
reasoning  does  not  point  to  any  certain  or  even  probable  advan- 
tage for  the  latter  in  this  particular  case.  It  is  true  that  large- 
scale  production  is  growing  in  the  worsted  industry;  but  its 
advantages  are  not  proved  to  progress  indefinitely  with  enlarging 
scale.  Integration,  though  carried  on  to  an  unusual  extent  in 
American  establishments,  has  to  compete  with  specialization  in 
this  country,  and  even  more  with  the  specializing  industry  of 
Europe.  The  goods  produced  are  of  great  variety,  and  subject 
to  the  whims  of  fashion ;  hence  standardization  of  equipment  and 
sweeping  application  of  machine  methods  cannot  be  carried  as 
far  as,  for  example,  in  the  manufacture  of  the  ordinary  grades  of 
cotton  goods.  It  is  to  be  observed,  moreover,  that  in  the  two 
other  leading  textile  industries  there  has  been  found  no  promis- 
ing field  for  a  great  combination:  neither  for  cottons,  where 
mass  production  has  been  carried  so  far,  nor  for  silks,  where  there 
are  conditions  resembling  those  of  woolens  as  regards  variety  of 
goods  and  irregularity  of  fashion.1  It  would  seem  that  only  cer- 
tain parts  of  the  woolen  manufacture  give  any  prospect  of  gains 
from  horizontal  combination;  more  particularly  those  parts  of  the 
worsted  branch  which  produce  on  a  large  scale  great  quantities  of 
homogeneous  fabrics.  But  on  this  subject  it  is  well  to  refrain  from 
prophecy,  perhaps  even  from  speculation.  The  whole  question 
of  the  technical  and  managerial  possibilities  of  combined  enter- 
prises awaits  solution,  and  not  least  so  in  this  industry. 

Turn  now  to  the  other  branch  of  the  woolen  industry,  that  of 
carded  woolen  goods.  Here  the  conditions  are  in  many  ways 
different ;  in  some  ways  they  seem  more  promising  for  the  Ameri- 
can producers,  in  others  less  so. 

This  is  the  older  part  of  the  industry,  and  therefore,  it  might 
be  supposed,  the  one  less  likely  to  be  dependent  on  the  tariff. 


« 


1  There  may  be  an  exception  in  the  cotton  manufacture  as  regards  the  production 
of  yarn,  in  which  the  New  England  Cotton  Yarn  Company  is  carrying  on  an 
experiment  at  once  in  combination  and  in  specialization;  and  perhaps  another 
exception  is  the  Cotton  Duck  Consolidation.  See  Dewing,  Corporate  Promotions 
and  Reorganizations,  chs.  xii,  xiii.  On  silks,  compare  what  was  said  above,  chapter 
xv,  pp.  246,  254. 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY    349 

The  manufacture  of  worsteds,  like  that  of  silks,  grew  up  after  the 
civil  war,  and  was  the  direct  product  of  high  protection.  The 
woolen  branch  is  the  oldest  of  all  in  the  textile  group;  it  goes 
back  to  the  "  domestic  "  system  of  colonial  days.  True,  it  is 
younger,  as  a  machine  using  industry,  than  the  cotton  manu- 
facture, since  the  epoch-making  inventions  of  the  eighteenth  cen- 
tury were  first  applied  to  the  latter.  But  carding,  spinning,  and 
weaving  machinery  was  adapted  to  wool  at  an  early  date  in  the 
nineteenth  century,  both  in  England  and  the  United  States.  The 
American  tariff  controversy  of  the  first  half  of  the  nineteenth 
century  was  concerned  as  much  with  the  duties  on  wool  and 
woolens  as  with  any  other  single  set  of  duties.  The  manufac- 
turers were  encouraged  by  high  rates  during  earlier  years,  and 
then  compelled,  after  1846,  to  adjust  themselves  to  rates  de- 
cidedly low.  Under  the  tariffs  of  1846  and  of  1857  the  effective 
duty  was  less  than  25  per  cent.1  Yet  the  industry  did  not  suc- 
cumb. Though  the  imports  formed  in  i860  a  much  larger  pro- 
portion of  the  total  supply  than  they  did  in  later  years,  the 
domestic  product  even  then  exceeded  the  imports,  and  the  manu- 
facturers looked  to  the  future  with  courage  under  duties  so  low 
that  they  would  be  adjudged  rank  free  trade  by  the  modern 
protectionists. 

If  this  was  the  situation  in  the  middle  of  the  nineteenth  cen- 
tury, it  would  seem  inferable  that  the  degree  of  dependence  on 
protection  would  have  become  less  rather  than  greater  after  the 
lapse  of  another  half-century.  All  manufacturing  industries 
grew  and  strengthened  after  the  civil  war.  The  textile  industries 
that  were  well  established  at  the  earlier  date,  as  well  as  other 
industries  then  in  a  firm  position,  continued  to  hold  their  own. 
The  high  rates  of  the  later  period  would  seem  unnecessary;  and 

1  The  duty  on  woolens  under  the  tariff  of  1846  was  30  per  cent.  But  wool  also 
was  dutiable  at  30  per  cent,  which  lessened  the  net  protection  for  woolens.  Just 
how  much  net  protection  remained  would  be  difficult  of  calculation.  In  1857  the 
rate  on  woolens  was  reduced  to  24  per  cent;  but  wool  having  a  foreign  value  of 
twenty  cents  or  less  was  admitted  free. 

The  history  of  the  woolen  manufacture  before  the  war  is  little  known;  it  offers 
a  promising  field  for  investigation.  Some  indications  of  its  position  in  1846-60 
I  have  gathered  in  my  Tariff  History,  pp.  144,  159  note.  On  imports  and  domestic 
production  in  i860,  see  the  figures  given  above,  p.  333. 


350         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

the  carded  woolen  manufacture,  mature  and  settled  as  early  as 
i860,  might  be  expected  to  show  in  1910  greater  independence 
of  tariff  support  than  the  newer  worsted  manufacture  which 
owed  its  origin  to  extreme  and  comparatively  recent  protection. 

Confirmation  of  this  impression  would  seem  to  be  afforded 
by  a  comparison  between  the  two  branches  as  regards  one  point 
on  which  stress  has  been  laid,  —  namely,  the  relative  use  of  im- 
ported and  domestic  machinery.      The  carded  woolen  branch 
was  found  by  the  Tariff  Board  to  be  in  a  different  position  from 
its  younger  rival,  in  that  it  relied  but  little  on  imported  ma- 
chinery.     Carding  is  the  step  in  the  woolen  industry  which 
corresponds  to  combing  in  the  worsted.      The  Board's  inquiries 
showed  a  sharp  contrast  between  the  sources  of  supply  for  combs 
and  cards.      Whereas  almost  all  the  combs  were  imported,  the 
carding  machines  were  preponderantly  (92  per  cent)  of  American 
make.    It  is  noteworthy  also  that  the  somewhat  modified  carding 
machines  used  in  worsted  mills  (they  prepare  wool  of  compara- 
tively short  fibre,  such  as  cross-bred  wool,  for  the  combing  opera- 
tion) were  also  largely  of  foreign  make;   here  again  the  worsted 
branch  relied  much  more  on  imported  equipment.      In  spinning 
there  was  the  same  contrast.      Much  the  greatest  part  (85  per 
cent)  of  the  mule  spindles  in  the  woolen  mills  were  made  in  the 
United  States.     But  in  the  worsted  mills  absolutely  every  mule 
spindle  was  imported.     It  may  be  noted  also  that  of  the  "  cap  " 
spindles  used  in  the  worsted  branch,  and  there  used  only  (being 
inapplicable  to  carded  wool),  the  proportion  of  American  ma- 
chinery was  insignificant,  —  only  8  per  cent,  as  compared  with 
92  per  cent  imported.      Here  again  the  worsted  branch  relied 
almost  exclusively  on  foreign  apparatus.1 

1  The  figures  are  as  follows  (Tariff  Board  Report,  p.  1042):  — 

Per  cent  Manufactured  in 

^ A 

United  States  Foreign  Countries 

Carding  machines,  woolen   92.2%  7-8% 

«  "         worsted    50.3%  49-7% 

Mule  spindles,  carded  wool    85.7%  J-4-3% 

"  "         combed  wool    .0%  100.0% 

Spinning  frames  (cap  spindles)   8.4%  91-6% 

On  combing  machines,  cf.  the  figures  already  given,  p.  343,  note.      On  cap 
spindles,  cf.  the  footnote  to  p.  343,  above. 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY    35  I 

The  significance  of  this  contrast,  however,  is  affected  by  some 
other  facts  brought  out  in  the  same  investigation.  It  appeared 
that  the  machinery  in  the  worsted  mills  was  the  more  modern, 
i.  e.,  had  been  in  use  for  a  shorter  period  than  that  in  the  woolen 
mills.  The  cards  in  the  latter  were,  it  is  true,  of  American  make; 
but  they  were  old.  Nearly  one-half  of  them  (47  per  cent)  had 
been  in  use  twenty-five  years  or  more.  The  cards  used  by  the 
worsted  makers  were  distinctly  more  modern,  —  of  foreign  manu- 
facture, it  is  true,  but  comparatively  new.  Only  7!  per  cent 
were  twenty-five  years  old  or  more,  as  compared  with  the  47  per 
cent  just  stated  for  the  woolen  mills.  A  similar  difference,  though 
not  so  marked,  appeared  as  regards  the  age  of  the  mule  spindles. 
This  part  of  the  equipment  of  the  woolen  mills,  while  chiefly 
American,  was  older  than  the  same  equipment,  all  of  it  imported, 
in  the  worsted  mills.1  The  combs  in  the  latter,  it  will  be  remem- 
bered, were  almost  all  of  foreign  make;  but  these  also  were 
comparatively  new.  The  preponderant  use  of  American  machines 
by  the  woolen  mills  might  thus  be  a  sign  not  of  progress,  but  of 
lack  of  it.  It  would  be  so  if  the  domestic  machines  were  inferior 
to  the  foreign,  or  at  least  not  superior.  And  similarly  the  pre- 
ponderant use  of  foreign  machines  by  the  worsted  makers  might 
indicate  that  they  were  using  the  best  that  was  obtainable.  This 
throws  the  question  of  the  comparative  effectiveness  of  foreign 
and  domestic  industry  one  stage  farther  back,  —  to  the  machine 
makers  who  supply  the  manufacturers.  So  far  as  concerns  the 
final  outcome,  the  problem  remains  the  same.  Whether  an  Am- 
erican industry  can  hold  its  own  against  foreign  competition 
depends,  to  repeat,  on  the  combined  effectiveness  of  all  the  fac- 
tors, —  climate,  power  resources,  and  raw  material;    quality  of 

1  The  figures  for  the  various  machines  here  mentioned  were  as  follows  (Tariff 
Board  Report,  p.  1042):  — 

Manufactured  in  Years  in  Operation 
Foreign 

United  States      Countries  Per  cents 

/ * ^       / * v      , * ,, 

Less 

Num-    Per    Num-    Per  than      5  @  is    i5@2S     Over 

ber      cent      ber     cent  5  Years     Years      Years    25  Years 

Carding  machines,  woolen    399      92.2         34       7.8  9.6         31.0         12  4         47.0 

worsted    331      50.3       327     49.7  26.3         33.2         32.9           7.6 

Mules,  carded  wool 504      85.7         84      14.3  8.0         50-°         20.2          12.8 

Mules,  worsted 370    100.0  24.9         35.9         36.2           3.0 

Spinning  frames  (for  cap  spindles) .. .    113        8.4     1,233      9i-6  20.3          49.6          12.9          17.2 


352         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

workmen;  ability  in  organization  and  management;  and,  finally, 
the  technological  equipment.  But  in  comparing  the  woolen  and 
worsted  branches  within  their  own  circle  of  operations,  the  mere 
use  of  domestic  machinery  by  the  one,  of  foreign  by  the  other, 
does  not  necessarily  measure  their  relative  progress  or  effective- 
ness. Apparently  the  worsted  branch,  using  imported  equip- 
ment, simply  turned  to  the  best  that  was  to  be  had; l  while  it  is 
conceivable  that  the  domestic  equipment  used  by  the  woolen 
branch  failed  to  keep  pace  with  the  general  American  progress  in 
labor-saving  devices,  perhaps  even  failed  to  keep  pace  with 
progress  in  foreign  countries. 

It  must  be  borne  in  mind  that  during  the  period  here  under 
review  the  woolen  branch  was  virtually  at  a  standstill,  while  the 
growth  in  worsteds  was  rapid  and  continuous.  The  retention  of 
old  equipment  in  the  former  may  seem  a  natural  result  of  adverse 
conditions  due  to  shifts  in  fashion  and  other  extraneous  causes. 
Yet  adverse  conditions  do  not  necessarily  have  a  deadening  effect 
on  industry.     It  is  often  said  that  severe  competition  and  trade  , 

crises  tend  to  have  the  opposite  effect,  —  to  compel  economies 
and  put  every  producer  to  his  trumps.  In  this  case,  as  in  the 
converse  case  of  favoring  conditions,  there  seems  to  be  no  a  priori 
ground  for  saying  that  either  progress  or  stagnation  will  be  pro- 
moted. High  protection,  for  example,  is  said  by  the  free  trader 
to  conduce  to  laxness,  by  the  protectionists  to  stimulate  domestic 
improvements.  Under  either  set  of  conditions,  —  depressing  or 
encouraging,  —  the  only  helpful  method  of  inquiry  seems  to  be 
the  examination  of  the  available  historical  and  statistical  material, 
and  also  of  the  indications  of  adaptation,  or  lack  of  adaptation, 
to  the  country's  general  industrial  environment.  , 

It  happens  that  in  this  instance  there  has  been  some  direct 
testimony  to  stagnation.     It  cannot  be  said  that  American  experi-  ■ 

1  "  The  explanation  of  the  great  use  of  foreign  machinery  in  the  mills  (in  some 
departments  its  exclusive  use)  given  by  the  establishments  visited  was  that  while  « 

the  importation  of  these  machines  increased  their  cost  more  than  60  per  cent  above 
that  of  their  foreign  competitors  in  the  woolen  and  worsted  industry,  it  was  neces-  < 

sary  to  buy  abroad,  since  with  the  exception  of  looms  and  some  few  other  machines 
American  manufacturers  had  not  been  able  to  furnish  machines  approaching  in 
result  the  work  done  by  the  foreign  machines."      Tariff  Board  Report,  p.  1043. 


< 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY    353 

ence  in  general  verifies  the  free  trader's  prediction  concerning 
this  sort  of  consequence  from  high  duties.  On  the  contrary,  the 
history  of  many  industries  (such  as  iron,  silks,  and  cottons)  indi- 
cates that  protection  and  progress  are  not  incompatible.1  But 
there  are  indications  that  in  the  carded  woolen  branch  backward 
establishments  were  enabled  to  hold  their  own  under  tariff  shelter. 
The  long-continued  use  of  old  machinery  would  seem  to  point 
that  way.  More  significant  is  the  fact  that  the  protectionist 
spokesmen  themselves  have  sounded  notes  of  warning.  During 
the  civil  war  the  abrupt  increase  of  demand  for  woolen  cloths 
inevitably  caused  all  sorts  of  mills  to  make  profits  even  with  poor 
equipment  and  slack  management.  Notwithstanding  a  process 
of  weeding  out  which  set  in  after  the  war  (the  wool  and  woolens 
act  of  1867,  with  its  elaborate  compensating  system,  was  in 
reality  an  endeavor  to  stave  off  the  inevitable  readjustment) 
this  abnormal  stimulus  seems  to  have  left  its  impress  on  the 
carded  woolen  industry  throughout  the  ensuing  half-century. 
During  the  brief  period  of  free  wool  and  lowered  woolen  duties 
under  the  Wilson  tariff  act  (1894-97)  some  plain  speaking  came 
from  the  protectionist  ranks.  It  was  said  that  the  carded  wool 
branch  had  been  backward,  and  consequently  had  been  hit  by 
the  lowered  duties  more  than  the  worsted  branch.  A  general 
overhauling  was  not  to  be  avoided.2     This  period  of  low  duties 

1  Compare  what  has  been  said  on  this  topic  in  chapter  ii,  pp.  28,  29. 

2  Mr.  S.  N.  D.  North,  then  Secretary  of  the  National  Association  of  Wool 
Manufacturers,  wrote  in  1894:  — 

"  Many  manufacturers  will  find  themselves  compelled  to  change  altogether  the 
character  of  their  products.  ...  At  present  it  seems  as  though  the  hardest  struggle 
was  before  the  mills  which  have  been  engaged  in  making  the  medium  cassimeres 
and  similar  goods  for  the  masses.  These  mills  have  had  the  American  manufacture 
to  themselves  and  they  have  been  able  to  determine  in  large  measure  the  character 
of  the  goods  made  to  supply  it.  That  great  advantage  will  no  longer  be  theirs. 
It  follows  that  radical  adjustments  will  be  necessary;  much  machinery  which 
sufficed  for  the  old  conditions  of  manufacturing  will  be  found  to  be  useless.  Many 
mills  will  have  to  be  reequipped  throughout;  there  are  many  in  which  it  will  be 
found  cheaper  to  abandon  them  altogether  than  to  incur  the  expense  of  a  complete 
overhauling.  ...  It  has  been  charged  against  our  manufacturers  that  they  are 
behind  those  of  other  countries  in  their  knowledge  and  application  of  modern 
economies.  The  charge  has  been  that  the  high  protective  tariff  has  saved  them 
from  the  necessity  of  learning  those  lessons  to  which  the  attention  of  foreigners  has 


354        SOME  ASPECTS  OF  THE  TARIFF  QUESTION 

and  of  stress  proved  short,  —  shorter  than,  the  protectionists 
themselves  expected;  or  else  such  confessions  would  hardly  have 
been  forthcoming.  In  1897,  the  tariff  barrier  was  put  up  again, 
high  and  strong  as  before;  and  behind  it  the  industry  was  en- 
abled to  go  its  way  for  another  long  period  (from  1897  to  1913) 
without  paying  attention  to  any  possibilities  of  foreign  competi- 
tion. 

What  now  is  the  explanation  of  the  situation  which  has  come 
to  view  in  this  account  of  the  American  woolen  manufacture  ? 
In  general,  the  tale  is  one  of  backwardness;  how  explain  it  ? 

One  explanation  often  given  is  that  all  is  chargeable  to  the 
duties  on  raw  wool.  This  is  the  outstanding  factor  not  present 
in  the  other  textile  industries.  For  silks  and  cottons  the  raw 
materials  never  were  subject  to  duty.  The  woolen  industry 
alone  labored  under  the  handicap  of  taxes  on  its  material.  The 
free  traders,  and  especially  those  who  preached  the  gospel  of  free 
materials,  laid  stress  on  this  circumstance.  The  wool  duty,  it 
was  said,  handicapped  the  manufacturers,  narrowed  the  range 
of  the  industry,  stood  in  the  way  of  diversification.  This  ex- 
planation was  particularly  acceptable  to  the  free  traders  because 
as  a  rule  they  were  reluctant  to  go  the  full  length  of  their  own 
creed  and  to  admit  that  the  manufacture  itself  might  be  in  danger 
if  their  policy  were  adopted.  No:  it  was  thought  that,  given 
free  wool,  the  manufacturing  industry  would  hold  its  own,  and 
even  expand  and  progress. 

But  I  cannot  believe  that  this  tells  the  whole  story.  No  doubt 
the  wool  duty  did  operate  as  a  handicap  on  the  manufacturing 
industry.  The  qualities  of  wool  are  extraordinarily  diverse;  the 
particular  way  in  which  the  duty  was  so  long  levied  served  to 
prohibit  many  grades,  and  to  hamper  the  use  of  others.  Prob- 
ably there  was  some  effect  in  keeping  the  manufacture  in  routine 
grooves,  even  in  a  rut.  But  the  wool  duty  was  so  completely 
offset  by  the  compensating  system,  and  the  characteristics  of  the 
manufacturing  industry  appear  in  so  many  matters  that  are  little 

largely  been  directed  of  late  years.  There  is  probably  some  truth  in  this  statement, 
though  not  so  much  as  those  who  make  it  believe."  Bulletin  Wool  Manufacturers, 
xxiv,  p.  258. 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY     355 

related  to  the  duty,  that  this  cannot  be  judged  a  decisive  or  even 
commanding  factor.  After  all,  though  the  compensating  system 
proved  to  be  ill  adjusted,  and  unequal  in  its  effect  on  different 
branches  of  the  industry,  the  duties  on  woolens  as  a  whole,  — 
compensating  and  "  protective  "  taken  together,  —  left  a  gener- 
ous margin  for  protection  in  almost  all  cases.  Just  as  the  wool 
duty  does  not  serve  to  explain  the  greater  growth  of  the  worsted 
branch  as  compared  with  that  of  carded  woolens,  so  it  does  not 
explain  the  general  characteristics  of  both  branches.  It  has  sins 
enough  of  its  own  to  answer  for,  without  being  held  accountable 
for  everything  that  seemed  to  go  wrong.  The  question  persists : 
how  account  for  the  seeming  failure  of  the  woolen  manufacture 
to  keep  in  line  with  the  general  march  of  American  industrial 
effectiveness  ? 

To  this  question,  as  to  so  many  in  the  field  of  economics,  it  is 
easier  to  give  negative  answers  than  positive ;  easier  to  say  what 
was  not  the  cause  than  to  say  precisely  what  was.  The  phenomena 
are  perhaps  most  puzzling  in  that  the  historical  sequence  in  the 
manufacture  seems  out  of  accord  with  its  contemporary  position 
and  prospects.  The  woolen  branch  (carded  woolen)  is  much  the 
older;  apparently  it  was  firmly  established  at  an  early  date;  yet 
it  has  been  beaten  by  its  younger  rival,  the  worsted  branch,  not 
only  in  size  but  apparently  in  adaptability  to  the  general  indus- 
trial conditions.  Yet  it  is  in  the  last-named  circumstance,  — 
adaptability  to  American  conditions  in  general,  —  that  the  solu- 
tion of  the  problem  is  most  likely  to  be  found. 

The  historical  anomaly  in  the  carded  woolen  branch,  —  its 
growth  and  assured  position  at  an  early  date,  contrasting  with 
the  more  precarious  modern  stage,  —  is  perhaps  to  be  explained 
on  the  ground  that  in  the  course  of  time  the  industrial  environ- 
ment itself  underwent  a  change.  In  the  United  States  of  the 
first  half  of  the  nineteenth  century  an  industry  of  small  or  moder- 
ate scale  was  more  likely  to  hold  its  own  securely  than  in  the 
United  States  of  the  twentieth  century.  Intelligence  and  handi- 
craft skill  on  the  part  of  the  individual  workmen,  which  play  so 
marked  a  part  in  this  branch,  had  not  then  found  so  many  other 
fields  for  advantageous  application.     Add  to  this  the  circum- 


356         SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

stance  that  the  industry  had  traditions  and  an  established  basis, 
inherited  from  the  domestic  spinning  and  weaving  of  colonial 
days,  with  their  necessary  adjuncts  in  the  fulling  and  finishing 
mills,  —  and  it  is  not  so  difficult  to  understand  the  contrast 
between  the  middle  of  the  nineteenth  century  and  the  beginning 
of  the  twentieth. 

The  worsted  industry,  on  the  other  hand,  exhibits  in  all  coun- 
tries the  more  dominant  characteristics  of  modern  industry,  — 
highly-developed  and  quasi-automatic  machinery,  standardized 
material,  large  plant,  a  dominance  of  organization,  and  (in  com- 
parison with  the  older  branch)  a  lack  of  individuality.  These 
characteristics  appear  most  sharply  in  the  manufacture  of  the 
staple  grades  of  fabrics,  turned  out  in  large  quantities  and  at 
prices  low  enough  to  make  possible  their  sale  to  multitudes  of 
purchasers.  It  is  in  accord  with  the  general  trend  of  American 
industry  that  our  manufacturers  should  have  turned  chiefly  to 
goods  of  this  sort,  while  those  calling  for  more  detailed  care,  more 
variety,  more  individual  finish  continued  to  be  imported  even  in  ( 

face  of  the  extremely  high  duties  levied  so  long.  It  is  in  accord, 
too,  with  the  general  international  division  of  labor  that  the  more 
highly-finished  goods  should  be  produced  in  France  more  than  in 
Germany,  and  in  Germany  more  than  in  England.  Thus  it 
would  seem  that  the  manufacture  of  staple  worsteds  was  the 
most  promising  part  of  the  industry  for  the  Americans,  giving 
favorable  opportunities  for  the  methods  and  appliances  which 
they  have  learned  to  apply  better  than  others.  And  yet,  to  re- 
peat, the  evidence  points  little  to  progress.  The  record  on  the  I 
whole  is  one  of  imitation,  not  of  independent  advance,  still  less 
of  leadership.  While  the  carded  woolen  branch  may  be  said  to 
have  been  left  behind  by  the  American  industrial  current,  the 
worsted  branch  simply  kept  up  with  the  general  European  move-  l 
ment,  and  showed  little  sign  of  keeping  pace  with  that  in  the 
United  States.1  , 

1  This  is  the  general  conclusion  reached  by  Mr.  T.  W.  Page,  one  of  the  members 
of  the  Tariff  Board,  an  able  economist  quite  without  bias.  In  an  address  reported 
in  the  Wool  Manufacturers'  Bulletin  (June,  1913,  p.  172)  he  summed  up  the  situa- 
tion thus:  "  Some  of  our  industries  are  more  prosperous  than  others;  they  afford 
higher  profits  and  higher  wages,  and  can  hold  their  own  in  competition  with  the 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY     357 

It  is  true  that  protection  veils  the  situation,  as  it  does  in  the 
case  of  the  silk  manufacture.  Behind  it  the  American  worsted 
industry  may  have  achieved  more  than  can  be  readily  seen,  more 
than  the  manufacturers  are  aware  of,  or  (if  aware)  are  ready  to 
admit.  Some  allowance  must  doubtless  be  made  for  that  timor- 
ousness  with  regard  to  foreign  competition  which  protected  pro- 
ducers show  at  all  times  and  in  all  countries.  Invariably  they 
exaggerate  their  own  deficiencies  and  exhibit  a  panic  fear  of  for- 
eign competitors.  But  even  after  making  allowance  for  this  sort 
of  exaggeration  in  the  general  accounts  given  by  the  protection- 
ists, such  specific  facts  as  the  Tariff  Board  brought  to  light 
regarding  the  importation  of  machinery  point  to  a  real  basis  for 
their  fears.  It  would  seem  that  the  American  wool  manufactures, 
as  a  rule,  are  not  able  to  meet  foreign  competition  on  even  terms, 
and  have  little  prospect  of  doing  so.  And  the  question  recurs, 
why  not  ? 

I  cannot  but  believe  that  there  is  something  in  the  quality  of 
wool  fibre  which  has  affected  fundamentally  the  course  of  develop- 
ment; just  as  the  quality  of  silk  fibre  affected  the  silk  industry. 
It  is  in  this  direction  that  we  are  most  likely  to  find  some  explana- 
tion of  the  peculiarities  in  the  history  of  both  branches  of  the 
American  wool  manufacture. 

It  is  certain  that  in  some  respects  at  least  wool  is  not  amenable 
to  machinery  of  the  quasi-automatic  kind.  As  regards  spinning, 
for  example,  the  ring  spindle,  which  dominates  the  cotton  manu- 
facture of  the  United  States,  has  not  been  found  available  for 
wool.  All  carded  wool  is  spun  on  the  mule;  and  in  this  branch 
of  the  textile  manufacture,  as  has  been  already  pointed  out,  the 
Americans  have  no  advantage  either  in  the  machinery  itself  or 
in  its  operation.1  Most  combed  wool  is  also  spun  on  the  mules. 
A  method  of  spinning  similar  to  that  with  the  ring  —  cap  spin- 
ning —  is  used  for  some  combed  wool  in  Yorkshire  and  in  the 
United  States.2    But  the  absence  of  any  American  improvements, 

world.  The  woolen  industry  is  not  one  of  these.  It  appears  to  have  no  single 
advantage  not  enjoyed  in  equal  or  greater  degree  by  the  same  industries  abroad,  and 
it  lacks  many  important  advantages  possessed  by  other  industries  at  home." 

1  Cf.  what  was  said  on  the  Cotton  Manufacture,  pp.  271,  279,  289. 

2  It  is  worth  noting  that  in  France  (and  I  believe  in  Germany  also)  the  mule 


358         SOME  ASPECTS  OF  THE   TARIFF  QUESTION 

and  presumably  of  any  special  adaptability  to  American  indus- 
trial conditions,  is  indicated  by  the  fact  that  almost  all  the 
spinning  machinery  of  this  kind  used  in  the  United  States  is 
imported  from  Great  Britain.  There  is  no  sign  of  such  American 
inventions  and  improvements  as  have  so  profoundly  affected  the 
spinning  departments  of  the  other  great  textile  industries,  — 
silks  and  cottons. 

As  has  been  repeatedly  pointed  out  in  these  pages,  weaving  is 
the  textile  operation  in  which  American  manufacturers  have  long 
been  most  proficient.  So  far  as  concerns  the  sources  of  supply 
for  weaving  machinery,  the  situation  in  the  woolen  mills  was 
found  by  the  Tariff  Board  to  be  quite  different  from  that  in  the 
spinning  department.  Over  three-quarters  of  the  looms  were  of 
American  manufacture.  Those  that  were  imported, —  a  very 
few  from  Germany,  the  larger  quota  from  England,  —  were  used 
chiefly  in  the  manufacture  of  fine  goods,  of  which  more  will  be 
said  presently. 

Nevertheless,  even  with  respect  to  weaving,  there  is  a  great 
difference  between  the  woolen  and  cotton  industries.  Woolen 
looms  are  usually  wide,  — five  feet  wide  or  more;  and  for  this 
reason,  and  also  because  of  the  less  automatic  character  of  the 
work,  it  is  rare  that  a  weaver  is  given  charge  of  more  than  two 
looms,  at  most  three.  Only  where  there  is  large-scale  production 
of  uniform  goods,  on  narrow  looms,  is  any  attempt  made  to  put 
a  weaver  in  charge  of  a  considerable  number  of  woolen  looms; 
an  endeavor  which  of  course  is  made  with  most  effect  where  the 
automatic  loom  has  been  found  applicable  to  some  worsteds.  It 
would  seem  that  the  nature  of  wool  and  the  yarn  spun  from  it, 
as  well  as  the  more  diversified  character  of  the  fabrics,  stand  in 
the  way  of  any  sweeping  application  of  the  methods  which  have 
proved  of  such  far-reaching  effect  in  the  weaving  of  cottons. 

Another  consequence  of  this  general  situation  is  a  difficulty 
in  finding  and  keeping  the  sort  of  weaver  who  can  run  a  woolen 

only  is  used:  cap  spinning  of  worsted  yarns  is  confined  to  England  and  the  United 
States.  Clapham,  The  Woolen  and  Worsted  Industries,  pp.  51  seq.;  Barker,  Textiles, 
p.  101.  Cf.  also  the  note  to  p.  343,  above.  England's  relation  to  the  Continent  is 
analogous  to  that  of  the  United  States  to  Europe  in  general;  the  machine  tends  to 
dominate,  and  processes  that  involve  direct  labor  tend  to  give  way. 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY    359 

loom  well.  The  Tariff  Board  in  the  course  of  its  inquiries  elicited 
from  manufacturers  a  number  of  instructive  statements.  Re- 
peatedly it  was  declared  that  the  woolen  weaver  must  have  the 
qualities  of  a  mechanic;  that  quickness,  a  good  eye,  a  skilful 
hand,  are  called  for;  that  the  good  weaver  is  a  high-priced  man; 
and  not  least,  that  one  who  is  highly  capable  tends  to  drift  away 
into  other  occupations,  in  which  his  services  command  higher 
pay.1  Similar  statements  are  made  about  the  weavers  of  fine 
grades  of  cotton  goods.  These  also  are  a  selected  group  among 
the  textile  operatives,  skilled  by  nature  or  by  training,  paid  at  a 
comparatively  high  rate,  and  able  to  find  ready  employment  in 
other  industries.2 

All  this  serves  to  illustrate  the  principle  of  comparative  effec- 
tiveness. Workmen  who  have  the  qualities  of  the  skilled  me- 
chanic are  needed  in  woolen  mills  and  in  the  cotton  mills  making 
the  finer  fabrics;  but  they  seem  to  add  no  comparative  effective- 
ness there.  In  American  industry  at  large,  the  man  of  mechani- 
cal capacity  and  training  is  in  great  demand,  —  for  instance,  in 
the  wire  fence  and  automobile  industries  mentioned  in  the 
letters  just  quoted.  It  is  among  the  characteristics  of  our  general 
industrial  conditions  that  the  gap  between  the  wages  of  skilled 
and  unskilled  is  greater  than  in  other  countries.  The  mechanic, 
the  craftsman,  the  man  of  quick  eye  and  deft  hand,  gets  an 
unusually  high  rate  of  pay,  and  has  an  unusually  favorable  posi- 
tion in  the  adjustment  of  wages  between  non-competing  groups. 
And  he  has  this  advantageous  position  because  in  general  his 
labor  is  applied  with  unusual  effect.     No  doubt  the  reasons  are 

1  See  the  series  of  letters  printed  in  the  Tariff  Board  Report,  pp.  1666,  1073,  1074. 
I  select  a  few  passages  from  the  abundance  of  illustrative  material.  "  A  good 
weaver  must  be  quick,  with  nimble  fingers,  good  eyesight,  clean  and  methodical." 
"  What  will  make  a  good  weaver  will  make  a  good  workman  in  almost  any  line, 
especially  mechanical."  And  precisely  because  such  a  man  has  mechanical  aptitude, 
he  is  drawn  away  into  other  occupations  where  his  qualities  tell  to  the  full  and 
where  in  consequence  he  gets  higher  pay.  "  The  best  weavers  go  into  some  other 
line  of  industry  where  the  pay  is  better.  Many  of  our  '  stars  '  of  past  years  went 
into  the  wire  fence  industry.  Many  more,  during  the  past  three  or  four  years, 
have  gone  into  the  automobile  industry."  Another  manufacturer  says  that  "  as 
to  our  expert  weavers,  they  seldom  stay  longer  than  three  years." 

2  As  regards  weavers  in  cotton  mills  I  am  confirmed  by  private  communications 
from  persons  engaged  in  the  manufacture  of  the  finer  grades  of  cotton  goods. 


360    SOME  ASPECTS  OF   THE  TARIFF  QUESTION 

complex;  partly  that  he  is  individually  skilful,  efficient,  strenu- 
ous, more  largely  that  inventors  and  employers  have  found  ways 
of  making  his  labor  tell  better  than  in  other  countries.  But  tell 
it  does;  and  hence  it  commands  high  pay.  Any  industry  which 
calls  for  such  men  must  pay  wages  at  the  current  rates;  and  if  it 
cannot  secure  from  them  results  commensurable  to  the  pay,  and 
if  its  products  are  subject  to  foreign  competition,  it  "  needs  " 
protection  and  clamors  for  it.  Precisely  this  seems  to  be  the 
case  in  the  woolen  manufacture. 

As  machinery  becomes  more  automatic,  the  skilled  workman 
is  needed  only  to  construct  it,  keep  it  in  repair  and  supervise. 
It  can  be  tended  by  an  unskilled  immigrant,  perhaps  a  woman. 
The  cause  of  comparative  effectiveness  in  industry,  —  if  there  be 
such,  —  must  then  be  sought  primarily  in  the  ingenuity  of  inven- 
tors and  the  organizing  leadership  of  business  managers.     The 
wages  of  the  rank  and  file  among  the  factory  operatives  who  are 
thus  directed  and  led  are  low  in  the  United  States  relatively  to 
those  of  mechanics,  though  high  relatively  to  those  of  similar 
operatives  in  European  mills.    Such  is  the  social  stratification  in 
the  typical  cotton  mill ;  it  tends  to  be  such  also  in  the  typical  silk 
mill  and  the  great  standardized  worsted  mill.     A  lower  grade  of 
operative  can  be  utilized  in  the  weaving  departments  of  these 
than  in  the  weaving  departments  of  woolen  mills  proper.     The 
proportion  of  women  employed  in  the  worsted  mills  is  consider- 
ably higher  than  in  the  woolen  mills  (49  per  cent  against  35); l 
nor  are  any  such  statements  as  those  just  quoted  to  be  found 
from  manufacturers  of  worsteds.     It  is  significant,  too,  that  in 
the  operation  of  cotton  looms  for  ordinary  goods  no  difference  is 
found  between  the  efficiency  of  men  and  women  as  weavers;  at 
piece  rates  they  earn  the  same  total.2     It  is  only  for  the  finer 
cottons  that  the  weaver  needs  those  mechanical  abilities  in  which 
men  excel  and  which  cause  them  to  be  preferred  in  woolen  mills. 

1  The  figures  are  from  the  census  returns  of  19 10.  In  England  also  the  weavers 
on  worsted  looms  are  chiefly  women,  those  on  woolen  looms  chiefly  men.  See 
Report  on  the  Woolen  and  Worsted  Industries,  etc.,  by  W.  A.  G.  Clark,  made  to  the 
Department  of  Commerce  and  Labor,  1900,  p.  49. 

2  See,  for  example,  the  Tariff  Board  Report  on  Cottons,  ii,  p.  495.  Conversations 
of  mine  with  manufacturers  have  confirmed  the  statement. 

. 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY     361 

In  this  regard  also  the  technical  conditions  would  seem  to  be  less 
favorable  to  the  industrial  acclimatization  of  the  carded  woolen 
manufacture. 

Still  another  factor  works  in  the  same  direction.  The  finish- 
ing processes  are  of  the  first  importance  for  carded  woolen  fabrics. 
They  are  of  great  variety,  and  they  are  almost  decisive  as  regards 
the  character  and  saleability  of  the  goods.  Typical  of  the 
various  manipulations  is  the  ancient  one  of  "  fulling,"  —  the 
cloth  being  passed  between  rollers  and  through  liquid  soap,  or 
soap  and  water.  It  is  thus  shrunk  and  felted.  In  essentials, 
the  process  remains  a  handicraft  operation,  even  though  no 
longer  carried  on,  as  it  was  in  earlier  days,  in  a  separate  fulling 
mill.1  It  is  little  aided  by  machinery,  and  is  dependent  on 
the  skill  and  unrelaxing  attention  of  the  individual  workman. 
The  same  is  the  case  with  the  raising  of  a  surface  by  teazles,  the 
stretchings  and  dryings  and  beatings  and  ironings.  To  quote 
from  Professor  Clapham's  excellent  account  of  the  industry  in 
England,  where  finishing  has  been  carried  to  greatest  elaboration 
and  perfection:  "  The  variety  of  finishing  processes  is  singularly 
great.  New  ones  are  constantly  being  devised,  many  of  which 
are  kept  more  or  less  secret."  But  worsteds  are  much  less  sub- 
ject to  them  than  woolens.  "  Light  worsted  dress  materials  are 
not  milled  at  all.  .  .  .  Generally  speaking,  worsted  materials 
are  altered  but  slightly  at  this  stage.  As  they  appear  in  the  loom, 
so  they  appear  in  the  warehouse;  colour  of  course  excepted  in  the 
case  of  piece-dyed  goods.  .  .  .  With  woolens,  the  reverse  is  often 
true.  Only  an  expert  in  these  cases,  could  identify  the  finished 
cloth  with  the  loose  and  altogether  different  substance  that  came 
out  of  the  loom.  In  one  case  finishing  is  a  subsidiary,  in  the 
other  a  primary  process."  2  And  this  primary  process,  it  is  to 
be  emphasized,  is  little  under  the  influence  of  modern  machinery 
and  labor-saving  devices;  in  other  words  it  is  one  in  which 
American  industrial  talent  finds  no  tempting  or  remuneratory 
field. 

1  The  small  fulling  mill  of  colonial  times  finished  the  home-spun  and  home- 
woven  cloths  of  the  country  folk. 

2  Clapham,  The  Woolen  and  Worsted  Industries,  p.  74. 


" 


362         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

In  accord  with  the  same  general  trend,  it  appears  that  the 
finer  grades  of  goods  are  more  likely  to  be  imported,  while  the 
cheaper  and  medium  grades  are  more  likely  to  be  made  at  home; 
and  this,  notwithstanding  efforts  to  promote  the  manufacture 
of  the  finer  grades  by  making  the  duties  on  them  particularly 
high.1  The  case  is  alike  with  all  the  textiles;  the  finer  goods 
of  all  kinds  are  more  apt  to  be  imported.  The  same  explanation 
is  invariably  given:  they  need  to  be  more  carefully  finished,  they 
call  for  more  labor,  and  high  wages  are  therefore  felt  to  be  an 
obstacle  in  particularly  great  degree.  The  more  fundamental 
explanation  has  already  been  indicated:  goods  of  the  most  ex- 
pensive sort  fail  to  be  made  within  the  United  States  because 
labor  is  applied  to  them  with  less  machinery,  less  of  labor-saving 
devices,  less  effective  organization,  —  in  sum,  with  less  advantage 
than  to  the  cheap  and  medium  grades.  So  it  is  with  woolens 
and  worsteds.  In  both  branches  the  protective  policy  was 
throughout  more  effective  on  the  cheaper  goods.  It  is  charac- 
teristic also  that  not  only  the  finer  fabrics  themselves,  but  the 
machinery  for  their  manufacture  had  to  be  imported,  — -  for 
carding,  combing,  and  spinning,  even  for  weaving,  where  the 
Americans  in  general  are  superior.  A  large  German  firm,  en- 
gaged in  making  fine  goods,  was  tempted  by  the  high  duties  of 
1897  to  transfer  a  plant  to  the  United  States.  It  had  to  import 
machinery  of  every  land;  and  not  only  this,  but  found  that  the 
factory  labor  of  this  country  was  also  ill  adapted  to  its  methods 
of  manufacture.  From  the  then-accepted  protectionist  point  of 
view,  all  these  disadvantages,  and  the  consequent  high  expenses 
of  production,  should  have  been  offset  by  correspondingly  high 
duties;  the  industry  was  to  be  "  acquired  "  on  any  terms  neces- 
sary to  domesticate  it.  But  these  special  conditions  would  seem 
to  be  in  reality  but  evidences  of  the  unsuitability  of  this  particu- 
lar branch  of  textiles  to  American  conditions.2 

1  See  the  sketch  of  the  rates  of  duty  given  in  chapter  xx,  p.  325.  The  ad  valorem 
(protective)  rate  on  the  dearer  goods  was  pushed  up  a  notch  in  1890,  and  still  an- 
other in  1897,  reaching  55  per  cent  in  the  latter  year.  . 

2  The  account  given  by  the  representative  of  this  firm  seems  to  me  so  instructive 
on  various  aspects  of  the  textile  situation  that  I  quote  from  it  with  some  freedom. 

"Many  European  woolen  enterprises  have  existed  for  generations,  and  even  , 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY     363 

It  deserves  to  be  noted  that  during  the  last  decade  of  the 
extreme  protective  policy  there  were  signs  of  improvement  in 
the  quality  of  American  woolen  fabrics,  and  especially  of  worsteds. 
That  some  change  in  this  direction  set  in,  I  am  convinced  by 
repeated  testimony  from  all  sorts  of  persons  conversant  with  the 
trade,  —  manufacturers,  dealers,  tailors.  Though  the  bulk  of 
the  American  woolens  remained  of  medium  grade,  an  increasing 
proportion,  and  one  not  inconsiderable,  was  of  better  grade  and 
finish  than  during  the  nineteenth  century;  the  improvement 
being  most  marked  in  worsteds.     Just  what  this  tendency  signi- 

those  of  more  recent  origin  can  draw  their  help  from  mills  which  have  had  such  a 
long  existence.  The  employers,  and  in  very  many  cases  their  fathers  and  grand- 
fathers before  them,  have  been  born  and  brought  up  in  the  business;  and  as  a  rule 
the  children  and  grandchildren  of  the  workpeople  are  also  trained  to  the  same  trade. 

"  And  what  is  true  of  the  firms,  and  the  workers  and  their  families,  is  also  true 
of  the  communities.  The  older  seats  of  the  woolen  industry,  like  Bradford  and 
Huddersfield  in  England,  parts  of  the  Rhine  province,  the  Lausitz,  Silesia  and 
Saxony  in  Germany,  Roubaix,  Tourcoing,  Elboeuf  and  Sedan  in  France,  to  men- 
tion a  few  of  the  best  known,  having  gathered  about  them  for  centuries  a  group  of 
trained  and  efficient  workers,  possess  an  inestimable  advantage  over  the  centers 
of  the  woolen  industry  in  America,  the  latter  being,  in  comparison  with  those  of 
Europe  above  named,  themselves  still  in  their  childhood  and  their  workers  more  or 
less  migratory.  .  .  .  The  operatives  in  American  woolen  mills,  in  spite  of  the  very 
much  higher  wages  paid,  are  largely  drawn  from  the  ranks  of  unskilled  labor.  And 
whence  does  this  unskilled  labor  come  ?  There  is  little  of  it  among  native-born 
Americans.     It  is  taken  from  the  steady  flow  of  immigrants  into  this  country.  .  .  . 

"  When  establishing  our  enterprise  in  Passaic,  N.  J.,  we  were  obliged,  in  order 
to  be  able  to  compete,  not  only  as  to  price,  but  also  with  respect  to  quality  and 
technical  perfection,  with  the  best  European  mills,  to  import  most  of  our  ma- 
chinery, because  a  great  deal  of  American  spinning,  weaving,  dyeing,  and  finishing 
machinery  is  not  yet  so  highly  developed  as  the  European.  This  is  especially  true 
of  the  machinery  used  in  what  is  known  as  the  French  system  of  worsted  spinning, 
which  is  being  adopted  more  and  more  each  year.  [The  French  use  the  mule  exclu- 
sively, and  a  drawing  system  of  their  own;  the  whole  adapted  to  making  soft  fabrics 
from  fine  wool  of  comparatively  short  fibre.  See  Barker,  Textiles,  p.  247;  Tariff 
Board  Report,  p.  1031.]  Also  our  entire  woolen  spinning  machinery  had  to  be 
imported  to  enable  us  to  compete  with  the  best  European  manufacturers. 

"  A  great  part  of  our  looms  could  be  bought  here,  while  others  had  to  be  im- 
ported on  account  of  special  requirements;  but  those  purchased  in  this  country 
were  nearly  as  expensive  as  the  imported  ones,  so  that  in  buying  them  we  had  to 
bear  our  share  of  the  protection  of  the  textile  machinery  of  this  country.  Dyeing 
and  finishing  machinery  used  in  our  mill  also  had  mostly  to  be  imported."  From 
a  memorial  to  Congress,  by  J.  Forstmann,  reprinted  in  Bulletin  Wool  Manufacturers, 
September,  191 1,  pp.  416-417. 


364         SOME  ASPECTS  OF   THE   TARIFF  QUESTION 

fled,  it  would  be  difficult  to  say.  The  obvious  explanation  would 
ascribe  it  simply  to  extreme  protection.  Make  your  duties  high 
enough,  and  you  can  bring  about  the  domestic  production  of  any- 
thing and  everything.  The  most  elaborately  finished  woolens 
and  silks  and  cottons  will  be  made  within  this  country  if  a  suffi- 
ciently heavy  handicap  be  imposed  on  foreign  producers;  even 
though  the  outcome  may  be  delayed  somewhat  by  lack  of  habitua- 
tion among  the  manufacturers  and  by  a  long-lingering  prejudice 
among  consumers  in  favor  of  imported  fabrics.  Presumably  the 
change  here  noted  was  the  effect  of  precisely  this  cause,  —  extreme 
protection.  But  possibly  it  was  due,  in  part  at  least,  to  some 
beginning  in  improved  processes,  better  oganization,  greater  effec- 
tiveness. Yet  the  evidence  pointing  this  way  is  slight;  nor  is  it 
on  general  grounds  probable  that  forward  steps  by  American 
manufacturers  would  be  first  taken  in  this  part  of  the  industry. 
It  is  in  the  production  of  the  standardized  fabrics  of  medium 
grade  that  the  opportunities  are  most  promising  for  advances  by 
Americans.1 

On  the  whole,  the  best  conclusion  I  can  reach  is  that  the  diffi- 
culties and  the  apparent  backwardness  of  the  wool  manufacture 
rest  partly  on  the  physical  characteristics  of  the  raw  material 
and  partly  on  the  impossibility  of  standardizing  its  fabrics  to  the 
same  degree  as,  for  example,  cotton  goods.  Both  of  these  cir- 
cumstances stand  in  the  way  of  mass  production  and  so  of  the 
sweeping  use  of  labor-saving  machinery.     The  silk  manufacture  t 

long  encountered  the  same  obstacles ;  it  has  still  to  face  them  in  a 
large  part  of  its  product;  yet,  as  we  have  seen,  the  march  of 
invention  appears  to  be  removing  the  first  obstacle,  and  at  all 
events  gives  some  promise  of  enabling  the  American  industry  to 
progress  to  independence.  The  absence  of  indications  of  similar 
progress  in  the  wool  manufacture  is  not  easy  to  explain.  Possibly 
this  is  no  more  than  a  sporadic  episode,  standing  apart  from  the 
general  industrial  movement.  Not  everything  in  economic  his- 
tory can  be  ascribed  to  the  uniform  action  of  the  same  causes. 


1  I  am  glad  to  record  that  my  general  conclusions  are  similar  to  those  reached  by 
Mr.  T.  W.  Page  of  the  Tariff  Board  and  stated  by  him  in  the  address  already  re- 
ferred to;  see  Bulletin  Wool  Manufacturers,  June,  1913,  p.  169. 


* 


CHARACTERISTICS  OF  THE  AMERICAN  INDUSTRY    365 

It  remains  puzzling  why  the  machine  processes  were  not  applied 
with  more  decisive  success  to  this  material,  and  why  Europeans 
and  not  Americans  took  the  lead  in  the  considerable  success  which 
was  achieved  in  the  worsted  branch.  Another  half-century  may 
bring  independent  advances  in  this  country ;  we  may  still  witness 
considerable  changes  in  the  existing  relations  between  the  wool 
manufacturing  countries  and  districts.  Possibly  free  wool  will 
have  greater  effect  in  promoting  the  development  of  the  Ameri- 
can manufacturing  industry  than  would  be  expected  in  view  of 
the  foregoing  analysis  of  the  influence  exercised  by  the  wool 
duties  in  the  past.  A  considerable  period  must  elapse  before  it 
will  appear  how  the  industry  may  adjust  itself  to  such  new  condi- 
tions as  were  established  in  19 13.  The  sober-minded  investigator 
will  be  slow  in  laying  too  much  stress  on  single  causes,  slow  in 
generalization,  slowest  of  all  in  prediction. 


i 


i 

< 


** 


»( 


INDEX 


<► 


•  l 


INDEX 


Agassiz,  1 66. 

Agriculture,  Department  of,  urges  beet- 
sugar  cultivation,  80,  84,  89,  92,  95; 
tries  to  foster  raw  silk  production, 
223. 

Alabama  iron  and  coal,  132. 

Allen,  230,  232,  235,  253,  254. 

Amalgamated  Copper  Co.,  169. 

Ame,  29. 

American  Sugar  Refining  Co.,  103. 

American  Woolen  Co.,  328,  346,  347. 

Anaconda  mine,  168. 

Anthracite  coal,  for  smelting  iron,  118. 

Antonelli,  224. 

Anvils,  200. 

Arbuckle,  competition  in  sugar  refining, 
106. 

Argentina,  317. 

Arlington  mills,  345. 

Atkins,  in. 

Atwood, 253. 

Australia,  great  possibilities  for  wool 
growing,  317. 

Automatic  loom,  for  cottons,  274;  for 
ginghams,  278;  slow  adoption  in 
Europe,  285;  for  worsteds,  345. 

Automatic  machinery,  42,  44. 

Baker,  64. 

Ballod,  94. 

Barker,  343,  338,  363. 

Batchelder,  260. 

Beauquis,  229,  238. 

Beckerath,  258. 

Beet  sugar,  Ch.  VII,  see  Contents;  fac- 
tories and  their  management,  95; 
factories  bought  by  the  sugar  trust, 
112,  and  sold  again,  113. 

Belcher,  172. 

Berglund,  132. 

Bessemer,  Sir  Henry,  121. 


Bessemer  steel,  121;  ore,  121  ff.,  133. 

Blast-furnace,  capacity  of,  128. 

Botzkes,  236. 

Bounties,  on  sugar  in  1890,  53,  55; 
psychological  effect,  55;  European,  on 
sugar,  205;  on  silk,  proposed  in  1890, 
223;   granted  on  silk  in  France,  224. 

Bradford,  339. 

Brauns,  236,  238. 

Brentano,  9,  n. 

British  corn  laws,  14. 

California,  movement  of  Japanese  into, 
from  Hawaii,  67;  beet  sugar  in,  80,  91; 
beet-sugar  factories  in,  95;  rivalry  of 
sugar  refineries  in,  104;  relations 
between  refiners  and  Hawaiian  plan- 
ters, 108. 

Calumet  and  Hecla,  166,  167. 

Canada,  reciprocity  treaty,  4;  anti- 
dumping legislation,  204. 

Cap  spindles,  343,  350,  351,  358. 

Carded  wool  fabrics,  333,  337,  348. 

Carding   machines,   how   far   imported, 

35°,  35i- 
Carnegie  Co.,  130,  135. 
Carpet  wool,  299. 
Cartwright,  277,  339. 
Carver,  88. 
Carving  knives,  201. 
Chamberlain  Tariff  Commission,  239. 
Charcoal  iron,  119,  125. 
Cheap  labor,  of  Orient,  45. 
Chemical  industries,  46. 
China,  raw  silk  industry,  224,  233. 
Chinese  in  Hawaii,  66;     in  beet-sugar 

fields,  85. 
Chittick,  256. 

Clapham,  337,  340,  347,  358,  361. 
Clark,  V.  S.,  66. 
Clark,  W.  A.  G.,  360. 


369 


37o 


INDEX 


Cleveland  administration  and  Hawaiian 
annexation,  62. 

Clothing  wool,  302. 

Coal,  resources  of  United  States,  126; 
imports  and  exports,  192. 

Coke,  Connellsville,  127. 

Coleman,  163. 

Colorado,  beet  sugar  in,  81,  go. 

Coman,  66. 

Combinations,  in  iron  trade,  130;  in 
copper,  168;  in  steel  rails,  172;  effects 
of  tariff  on,  summary  statement,  189; 
none  in  silk  manufacture,  258;  in 
woolen  manufacture,  347. 

Combing  machine,  339;  imported  into 
United  States,  343. 

Combing  wool,  302. 

Comparative  advantage,  principle  of, 
Ch.  II,  see  Contents;  as  regards  sugar 
beet,  88;  iron  and  steel  manufactures, 
198;  raw  silk,  224;  English  silk 
manufacture,  242;  cotton  manufac- 
ture, 281;  carpet  wool,  300;  weaving 
in  woolen  mills,  359. 

Compensating  system,  322. 

"  Competitive  "  tariff,  10. 

Connellsville  coke,  127. 

Copeland,  262,  265,  266,  268,  270,  277, 
278,  280,  283. 

Copper,  Ch.  XI,  see  Contents;  duties 
on,  1869,  1913,  162;  chart  on  prices, 
163;  statistics  on  United  States  pro- 
duction, 167. 

Corn  belt,  principle  of  comparative  ad- 
vantage in,  88;  why  no  sugar  beets  in, 
88. 

Cort,  88. 

Cost,  uncertain  meaning  of,  105. 

Cotton  manufacture,  see  Contents,  Chs. 
XVII  and  XVIII;  statistics  of  growth 
of,  266;   in  the  south,  269,  286. 

Cottons,  duties  of  1913  on,  265. 

Coventry,  silk  manufacture,  239,  242, 
252. 

Craig,  305. 

Crefeld,  as  a  silk  center,  236. 

Cross-bred  sheep  and  wool,  303,  312, 
3i4- 


Cuba,  reciprocity  treaty,  75;  large 
supply  of  sugar  from,  76;  peculiar 
effect  of  reduction  of  duty,  77;  reduc- 
tion of  no  effect  as  regards  sugar  re- 
finers, 107. 

Culbertson,  315. 

Cutlery,  200. 

Deductive  reasoning,  on  international 
trade,  27;  as  regards  young  industries 
argument,  158. 

Department  of  Agriculture,  see  Agri- 
culture. 

Dewing,  348. 

Differential  on  sugar,  54,  100,  102. 

Diminishing  returns,  in  relation  to 
duties,  14;  on  Hawaiian  sugar  lands, 
63;  as  regards  wool,  317. 

Draper  Co.,  271,  276. 

Draper,  G.  O.,  274,  277. 

Draper,  W.  F.,  253,  272,  277,  283,  294. 

Dumping,  6;  as  regards  tin  plate,  183; 
of  iron  and  steel  manufactures,  202; 
general  reasoning  on,  204;  Canadian 
legislation,  204. 

Dunbar,  175. 

Duran,  234,  238. 

Dutch  standard  for  sugar  duties,  100. 

Effectiveness  of  labor,  causes  of,  37. 

Einaudi,  166. 

England,  position  in  international  trade, 
46,  48;  iron  production,  117;  silk  in- 
dustry, 239,  258;  supremacy  in  fine 
spinning,  290. 

Esslen,  94. 

Evans,  264. 

"  Fair  price,"  210. 

Farrell,  212,  213. 

Federal  Steel  Co.,  131. 

Ferro-manganese,  13,  144. 

Filatures,  for  silks,  225. 

Files,  200. 

Forstmann,  363. 

France,  progress  retarded  by  protection, 

29;   silk  manufacturing,  237. 
Fulling,  361. 


».. 


♦  ' 


INDEX 


371 


Gallatin,  4,  126. 

Germany,  wheat  duty,  11,  16;  progress 
promoted  by  protection,  29;  ma- 
chinery imitated  in,  44,  198,  283; 
leadership  in  chemical  industries,  46; 
beet-sugar  factories  copied,  95;  iron 
industry  in,  133,  151;  imports  almost 
all  its  wool,  320. 

Goldstein,  25,  153. 

Grant  reel,  225. 

Great  Britain,  see  England. 

Giinther,  153. 

Held,  239. 

Hard  wick  report,  103. 

Harrison  administration  and  Hawaiian 
annexation,  62. 

Harvester  Co.,  International,  199. 

Havemeyer,  114. 

Hawaii,  Ch.  V,  see  Contents;  statistics 
on  population,  68;  relations  between 
planters  and  the  sugar  trust,  108. 

Hindus,  in  beet-sugar  fields,  85. 

Holland  and  England,  earlier  rivalry,  48. 

Homestead  strike,  135. 

Howard,  223. 

Hungary,  encourages  raw  silk  produc- 
tion, 224. 

Immigrant  labor,  in  beet-sugar  fields,  86, 
87;  in  the  iron  industry,  137. 

Imports  and  Prices,  Ch.  I,  see  Contents. 

Inductive  reasoning,  as  regards  young 
industry  argument,  27,  158. 

Industrial  Commission,  report  of  1900, 
103,  104. 

International   demand,   equilibrium   of, 

17- 
International  Harvester  Co.,  199. 

Iron,  specialized  imports,  13;  produc- 
tion in  various  countries,  117;  fuel 
used  in  United  States,  119;  charcoal, 
119;  statistics  on  United  States  pro- 
duction, 134;  duties  on,  1870,  1913, 
139;  attempts  to  measure  burden  of 
duties  on,  145.  (See  also  pig-iron.) 

Iron  ore,  sources  of  supply,  121;  statis- 
tics of  production,  124. 


Iron  and  steel  manufactures,  imports 
and  exports  chart,  193,  194;  "  dump- 
ing "  of,  194,  202. 

Irrigation  for  sugar  plantations,  Hawaii, 
63;  Porto  Rico,  71;  for  beet  sugar, 
90. 

Italy,  raw  silk  production,  224,  225. 

Japan,  raw  silk  industry,  234. 

Japanese,  cheap  labor,  44,  45;  immi- 
gration into  Hawaii,  67;  movement 
from  Hawaii  into  California,  67;  in 
beet-sugar  fields,  85. 

Jones,  186,  188. 

Jenks,  103,  104,  180. 

Jevons,  126. 

Kanakas  (Hawaiian  natives)    dying  off, 

66. 
Knitting  machines,  199. 

Labor  contract  in  Hawaii,  66. 

Labor  supply,  in  silk  mills,  232;  in  cotton 
mills,  273,  275,  286;  in  woolen  and 
worsted  mills,  344,  359,  360,  362. 

Labor  unions,  in  the  iron  trade,  135; 
opposed  by  Steel  Corporation,  136; 
in  Welsh  tin  plate  industry,  186; 
oppose  automatic  looms  in  England, 
284. 

Lake  Superior  ore,  122. 

Lancashire,  cotton  industry  in,  290. 

List,  20,  93. 

Lister,  207,  241,  339. 

Lloyd,  200,  201. 

Louisiana,  effects  of  sugar  duty,  Ch.  IV, 
see  Contents;  wherein  real  gain  from 
purchase  of,  68;  relations  between 
sugar  planters  and  the  trust,  no. 

Lowry,  no. 

Luxemburg  iron  ore,  152. 

Lyons,  as  a  silk  center,  237. 

MacColl,  306. 

McKinley   tariff  act,   sugar  duty,   53; 

effect  on  Hawaii,  61;   tin  plate  duty, 

176. 
Machine  tools,  24,  197. 


372 


INDEX 


Machinery,  why  used  more  by  Ameri- 
cans, 40;  automatic,  42;  for  silk 
manufacturing,  exported,  251;  im- 
ported for  mule  spinning,  289,  343, 
350;  for  combing,  imported,  343. 

Managing  ability  in  relation  to  compara- 
tive advantage,  42. 

Marshall,  8,  17,  204,  291,  314. 

Mason,  225,  233,  234. 

Meade,  175. 

Merino  sheep,  302,  303,  311,  314,  315, 
34o. 

Mesabi,  ore  field,  123,  129. 

Metal  duties,  24. 

Methodology  in  economics,  155. 

Mexicans,  in  beet-sugar  fields,  85. 

Michaelis,  320,  347. 

Michigan,  beet  sugar  in,  89,  91. 

Mill,  J.  S.,  17,  18,  20,  155,  156. 

Monopoly  product,  tax  on,  5. 

Montgomery,  273. 

Moore  properties,  132,  180. 

Mule  spindles,  for  cottons,  270;  for 
worsteds,  343;  for  woolens,  351;  how 
far  imported  into  United  States,  343, 
350;  in  France,  357. 

Newberry,  149. 

North,  296,  353. 

Northrop,  277. 

Northrop  loom,  274,  275,  276. 

Noils,  329,  330. 

O'Farrell,  17. 

Ohio  wool,  308,  313,  315. 

Page,  356,  364. 

Paterson,  strike,  231;  silk  center,  232. 

Pearl  harbor,  58. 

Pennsylvania,  iron  production,  120,  125, 

126,  134;  labor  laws  lax,  233. 
Perrin,  105. 
Philippines,  sugar  duty,  72;  remission  of 

duty  in  1909,  73. 
Philippinos  in  Hawaii,  68. 
Pig-iron,  prices,  142;  statistics  of  prices, 

159;    imports,  144,  191;    statistics  of 

imports,  160;  Scotch,  144. 


Pittsburgh,  120,  126,  127. 

Pocket  knives,  200,  201. 

Polariscope  test  for  grading  sugar,  101. 

Pool,  on  steel  rails,  173. 

Porto  Rico,   sugar,   70;    irrigation,   71; 

revenue  from  duties  put  into  a  "  trust 

fund,"  74. 
Portuguese  in  Hawaii,  66. 
Posadowsky,  25. 

Reciprocity      treaty,      proposed      with 

Canada,   4;    with  Hawaii,   58;    with 

Cuba,  75. 
Reichesberg,  224. 
Ribbon  industry,   230,   244;    American 

looms    exported,     253;     double-deck 

looms  used  in,  257. 
Ring  spinning,  270,  280. 
Rionda,  56. 
Russian  Railway  Rates,  in  relation  to 

duties,  9. 

Schedule  K,  wool  and  woolens  duties, 
325,  328,  331. 

Schmoller,  156,  158. 

Scotch  pig-iron,  144. 

Scientific  management,  43. 

Sering,  153. 

Sewing  machines,  198. 

Sewing  silk,  243. 

Shaw,  80,  83,  90,  95. 

Sheep,  statistics,  308. 

Shoddy,  329,  330. 

Shortt,  204. 

Silk,  raw,    222;    spun, 
sewing,    243 ;     looms 
statistics   of   exports   of,    256; 
mings  chiefly  imported,  248. 

Silk  manufacture,  see  Contents,  Chs. 
XIV,  XV,  XVI;  cited  for  illustration, 
22;  statistics  of  growth,  219;  speciali- 
zation in,  220. 

Singer  sewing  machines,  199. 

Skirted  wool,  306,  327. 

Spiegel-eisen,  13,  144. 

Spitalfields  silk  manufacture,  239. 

Spreckels,  61,  104,  108,  no. 


226,  240,  242; 
exported,  254; 
trim- 


.;. 


: 


- 


■ 


: 


INDEX 


373 


Spun  silk,  226,  242;  thriving  industry  in 
England,  240. 

Stahlwerksverband,  209. 

Standard  Oil  Co.,  tin  plate  purchases, 
177,  188. 

Standardized  goods  in  America,  41. 

Steel  Corporation,  formation  of,  131; 
combats  labor  unions,  136;  inception 
not  promoted  by  tariff,  171;  absorbs 
Tin  Plate  Co.,  181;  "  dumping  "  by, 
202. 

Steel  Products  Co.,  statistics  of  exports 
by,  203. 

Steel  rails,  imports  affected  by  trans- 
portation conditions,  13;  duties,  1870, 
1913,  139;  prices  shown  by  chart, 
140;  relation  to  young  industry  argu- 
ment, 140;  price  influenced  by  pools 
and  combinations,  172;  "  fair  price," 
211.  See  also  Contents,  Chs.  XI,  and 
XII. 

Sugar,  see  Contents,  Chs.  IV-VIII; 
bounty  of  1890,  53,  55;  refiner's  mar- 
gin, 102,  105;  refineries,  size  of,  102; 
trust,  103  ff.;  European  bounties  on, 
205;  duties,  rates  of  1870-1913,  53; 
burden  of,  estimated,  98 ;  on  raw  and 
on  refined  compared,  100;  differential, 
54,  100,  102;  Dutch  standard  system, 
100. 
Sugar-mill  systems  on  plantations,  56, 

72. 
Switzerland,  decline  of  raw  silk  produc- 
tion, 224;    importance  in  silk  manu- 
facturing,  236;    water-power  utilized 
in  silk  manufacture,  238. 

Taft,  urges  remission  of  Philippine 
duties,  74. 

Tariff  Board,  on  cottons,  265,  279,  289, 
290,  360;  on  wool,  296,  314,  327;  on 
compensating  system,  330,  331;  on 
woolens  and  worsteds,  337,  343,  350, 

35i,  359- 
Taylor,  88,  89,  311. 
Tin  plate,  duties,  176;   chart  on  prices, 

180;      Tin    Plate    Co.    formed,    180; 

statistics  on,  190. 


Thomas,  186. 

Thomas-Gilchrist  process,  152. 
Throwing,  silk,  228;  machinery  invented 

in  United  States,  229;  exported  from 

United  States,  252. 
Thiirkauf,  237,  238. 
Timmins,  252. 
Tops,  339,  345- 
Trade  unions,  see  labor  unions. 

Underwood,  3. 

Utah,  beet  sugar  in,  81,  90. 

Velvet,  ribbons,  245;   fabrics,  246. 
Vogt,  103. 

Wages,   what   determines  general   rate, 

31;  in  relation  to  tariff,  32. 
Wales,  tin  plate  industry,  183,  186. 
War,  victory,  industrial  effects,  154. 
Warner,  240,  241. 
Weaving,  American  superiority  in,  253, 

273,  344- 

Wells,  101,  145. 

Western  Sugar  Refining  Co.,  109. 

Wheat,  German  duty,  11,  16. 

White,  129. 

Whitney,  61,  63,  64,  65. 

Wilbrandt,  238. 

Willett,  106,  no. 

Willoughby,  74. 

Wisconsin,  dairying  in  competition  with 
beet  sugar,  89. 

Wood  mill,  346. 

Wool,  see  Contents,  Ch.  XIX;  duties, 
n,  16;  tariffs  of  1867-1913,  297; 
burden  of,  calculated,  307;  effect  of 
duties  on  the  manufacturing  indus- 
try, 354;  chart  showing  production 
and  imports,  298;  average  imports, 
304;  cost  of,  314.  (See  also  carpet 
wool,  combing  wool,  clothing  wool.) 

Woolens,  manufacture  and  duties,  see 
Contents,  Chs.  XX,  XXI;  rates  of 
duties,3  25 ;  statistics  of  production,333 . 

Worsteds,  333,  334,  337- 

Wright,  296,  306,  310,  316. 

Wyckoff,  227,  243. 


374 


INDEX 


Young  industries,  protection  to,  Ch.  II, 
see  Contents;  as  regards  agriculture 
and  beet  sugar,  93;  steel  rails,  141, 
147;  iron  industry  in  Germany,  153; 
iron  industry  in  United  States,  Chs. 
IX,  X,  passim;  in  relation  to  method- 


ology, 156;  argument  not  applicable  to 
copper,  162,  165,  169;  possible  appli- 
cation to  tin  plate,  184  fL;  as  regards 
silk  manufacture,  252,  257;  not  appli- 
cable to  cotton  manufacture,  294. 


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